Leveraged ETFs are not always more risky or complex than an individual company stock. Some companies have very complex operations or products that are harder to understand than a 2x ETF. The risk of a single company going to zero value is probably larger than the risk of an 2x stock index going to zero. The use of a leveraged ETF could be related to a need for liquidity, or be tax related. For example, an investor that has 50% cash and 50% invested on a 2x index ETF has a very similar risk profile than someone that is 100% invested on a 1x index ETF, but the cash is available without any tax burden. It is also available for a purchase (i.e.: down payment on a house), without having to sell at an undesired time. Many examples exist for the use of these instruments, including the investor that wants to take 2x risk/reward. Why should we (adults that own our own money) not be allowed to do so?
Sergio Prusky Comment On Regulatory Notice 22-08
Leveraged ETFs are not always more risky or complex than an individual company stock. Some companies have very complex operations or products that are harder to understand than a 2x ETF. The risk of a single company going to zero value is probably larger than the risk of an 2x stock index going to zero. The use of a leveraged ETF could be related to a need for liquidity, or be tax related. For example, an investor that has 50% cash and 50% invested on a 2x index ETF has a very similar risk profile than someone that is 100% invested on a 1x index ETF, but the cash is available without any tax burden. It is also available for a purchase (i.e.: down payment on a house), without having to sell at an undesired time. Many examples exist for the use of these instruments, including the investor that wants to take 2x risk/reward. Why should we (adults that own our own money) not be allowed to do so?