What Are Leveraged ETN's? | VelocityShares | UWTIF MORL MRRL | Structured Notes, Structured Products

[@theevilmuppet]

You've got a beautiful, easy-to-digest manner and method when describing these instruments - please stay awesome!

[@PBoyle]

Glad you like them!

[@jefflamb5218]

Yeah, what’s with this guy...something compelling about his monotone delivery that fascinates me, and I’m a retired CPA that loathed conferences and dry presentations during my career!

[@theevilmuppet]

@@PBoyle most definitely! Your factual delivery portrays confidence of accuracy that is not present in many other channels that are either promoting benefit or going on about danger.

[@fallenangel2123]

@@PBoyle You've got it wrong kzbin.info/www/bejne/hIfXZ5yipc2mbbM

[@williamchamberlain2263]

I like the almost effortless skirting of libel action with nonchalant but carefully precise phrasing.

[@TheCyclingCardio]

This is the first time I understand most comprehensively about leveraged structure investment products..decades ago, some company in my country sell these kinds of products, a leveraged investment tracking forex..they all go bust

[@christimmerman6887]

Thanks to P.B's break down concerning a plethora of financial instruments and how they work, this trucker wearing hat guy with a $65,000 bass boat has just upgraded to a double wide. Keep up the invaluable work you do for us!

[@dot333333]

Thank you for these videos Patrick. I have really enjoyed them. Every article on leveraged ETFs always points out volatility drag... if the underlying goes up one day and down the next the 3x leveraged fund will do worse than 3x. What they usually don’t point out though is that on consecutive up days the 3x leveraged ETF should outperform the underlying by greater than 3x. If you Monte Carlo sim a leveraged fund vs its underlying (ignoring fees and assuming normal returns) you’re mean return of the leveraged fund after any time period actually is greater than the underlying’s mean return by the leverage factor (e.g. a 3x fund mean return will be 3x the underlying). The median return however will not be. Greater volatility in the underlying or greater leverage will reduce the median return and increase the right skewness of returns in the leveraged fund.

[@IamGrimalkin]

What distribution function is your monte carlo simulation based on?

[@user-ej7ss8ei2g]

yep

[@binaydhakal6179]

I Just bought your book on Amazon, Can't wait to look forward to your work.

[@PBoyle]

Hope you enjoy it!

[@Jean-Berry]

Don't mind me, I'm just binge watching all of Patrick's videos to learn more about finance

[@joelp7780]

U keep it simple and straight to the point no hype

[@surelywoo]

Thank you Mr. Boyle! I'm researching a leveraged ETN, and this greatly improved my understanding.

[@linx187]

Well done. No BS description. Straight forward and honest.

[@woodymonte]

Patrick you tell an important story. Most of these leveraged ETN's have the built in right to close with no warning leading to considerable losses to the consumer.

[@phuckhugh2698]

MORL and MRRL went under during the pandemic but others survived. the returns were fantastic.

[@whotube88]

King Patrick dropping PURE KNOWLEDGE ‼️ 🔥🔥🔥🙌👑👑

[@shahhome5999]

Excellent explanation on ETN's , by far the best on youtube I've seen!

[@PBoyle]

Glad you liked it!

[@fallenangel2123]

@@PBoyle You neglected to mention what is good about them.

[@224dot0dot0dot10]

@@fallenangel2123 So what is good about Exchange Traded Notes (ETN's) ? I honestly am not an expert on ETN's but I do understand that ETN's are more like bonds in the bond market because ETN's are unsecured debt instruments that are usually issued by banks.

[@mikestanmore2614]

Thankyou for taking the time and effort to create your channel and your content, Patrick. It has been very informative.

[@PBoyle]

Thanks for watching! I'm glad you find it helpful.

[@mikestanmore2614]

@@PBoyle Well, for what it's worth, you have another subscriber.

[@jaehus1971]

Another great video !! I like the tie !

[@ullititz]

Hey, awesome content! It would be great if you could add an example payout structure of those products in the videos. For example, how does an ETN internally work in terms of cash flows. Thank you for your great work!

[@PBoyle]

Great suggestion!

[@amay9870]

I too agree with the suggestion.

[@EckosamaGhostTsushima]

i agree. i dont know if you did this already but no one explains this stuff on youtube.

[@MsTyrie]

Good suggestion. Also, ETFs and how their rebalancing can affect those who hold shares of them. And with index ETNs, there are periodic changes to the member companies of an index. A similar type of rebalancing.

[@jeffshackleford3152]

Could you do a video on exchange traded debt notes/debentures?

[@binaydhakal6179]

Hi Patrick, I really liked your documentary and narration on Charls Ponzi. Currently, I'm working towards and passionate about getting masters in Financial Mathematics. I don't know much about your background but do you think you could provide us a content about how physics and pricing on financial instrument are related.

[@PBoyle]

Hi Binay, I will add that idea to my list. The next few videos will be all about statistics and finance, which are tied to the new book that I have coming out shortly. Hopefully you will find them interesting.

[@Diamond_Hanz]

Barclays brought me here...4/29/2022

[@andrewangerbauer5433]

Thanks! Great content as always! 💯

[@PBoyle]

Appreciate it!

[@nathansmith8187]

Thanks. Just went all in on SOXL

[@miked412]

First mistake - falling behind in retirement planning. Second mistake - investing almost 100% in one asset (not even asset class). Third mistake - choosing an investment with an 18% dividend yield.....quite risky for speculating, insanely risky for retirement. So much of this could have been avoided with education.

[@alka3341]

Thank you for your video. You're quite correct that a 3x leveraged ETF tracking the S&P500 would not give you 3x the long-term return of the index but rather it would triple the daily return....but that's still quite a lot. If you look at the long term chart of the SPXL (3X S&P500) a share bought at about $3 in 2009 would be worth $52 today (even after the huge drops in March). I did open a position in April and closed it last week and it's paid off handsomely (+80%). Why did I sell? I was concerned about the Robinhood news and, sure enough, later on TSLA went down quite a bit (and then again, it may have just been luck!). I sense a bit of a downward pressure in markets now, so I am still dwelling on whether to use a leveraged short ETF of the S&P500. And yes, I am a retail investor and I completely understand that these are highly levered products based on complex swaps conducted on a daily basis (I have an academic background in economics and finance, full disclosure). And yes, such products do require a good understanding of them and there are certainly not apt for betting the whole farm on them. But let's suppose for the sake of argument that you really wanted to do the dumb thing and allocate a sizeable chunk of your portfolio into 3X S&P500 product like that (with the daily swap stop triggered at a drop of 12% or higher). What would you have to do to mitigate risks? SImply keep another good chunk (a third to a half of the 3X leveraged position) entirely in cash and buy opportunistically a leveraged 3X inverse ETF that triples the S&P500 drops in positive for you. And no, chances are it won't completely offset the losses but it would certainly make them much more bearable. And finally I am sick and tired of paternalism on part of politicians and journalists and calls to ban my access to products that I as a retail investor can learn perfectly well how to use! As if the UCITS bulls**t here in Europe were not enough of a limitation already...Just because some people want to bet the farm on it and don't understand what they're doing doesn't mean retail investors who can understand it should be deprived of access to such things.

[@EckosamaGhostTsushima]

in american schools we learned about stocks, but always basic info that wont really help us. i agree dont deprive people, but the lack of financial education is abysmal where I am in America. It should be one of the top priorities of what is taught in school and taught well. I consider it more important that upper level math and science in high school, being completely honest.

[@chrisf1600]

I know I'm very late to this video, but it raised quite a few questions in my mind. Is the ETN format inherently "worse" than ETFs ? Or is it just that naive investors get lured into thinking that notes == bonds == safe ? Do you think all forms of leverage are equally dangerous or just the daily-resetting kind ? Do you think there's ever a place for leverage in a retail portfolio, as long as it's used sensibly ? @9:08 you mention that "leveraged ETFs lose out from compounding" but I think that's only part of the picture. They can lose out in choppy markets, yes, but in a trending market the daily resetting works in your favour because each day you start from a higher point. Also @14:00 - did XIV go "below" zero (ie negative) or did it just go to zero ? I assume it's the latter. Worth clarifying that even a long levered ETF can go to zero. Eg if I hold 3X FTSE100 and the FTSE falls 35%, I've lost everything. Anyone still reading should check out Corey Hoffstein's writing on "return stacking", he argues for the careful use of leverage to get a more efficient Sharpe ratio while not sacrificing equity exposure.

[@Cusnpbzn]

this is why the chart for leveraged products generally go from the upper left to the lower right very consistently. The funny thing is, both the 3x long and 3x short products have almost identical charts.

[@chrisf1600]

Not sure I agree, at least not in all cases. Take look at the long-term charts of 3USL and 3USS (3x S&P500, long and short). They are completely different.

[@brendannelson525]

Yeah the etns and etfs that follow stock indexes are insanely high if anything you just need serious balls to hold those long term

[@KalelSonOfDurel]

Hey Patrick! Love the content. I remember you from the Lion's Den. Are you still in touch with Ewan?

[@PBoyle]

Hi Kal, Yes I am, he is a great guy. That is an old video, I think Eurex took it down from KZbin a few years ago.

[@KalelSonOfDurel]

@@PBoyle I was so inspired by it that I ripped a copy for my private collection. I re-watch it sometimes for inspiration. When I do, I think to myself: "I want to be like Patrick someday"

[@ellenorbjornsdottir1166]

So a LevETN is a great note to put on one's play-money account?

[@gordonquickstad]

Very interesting and well done.

[@deathdrummer1019]

You remind me of a hitman I don't know why.. anyways love your videos. Always end your videos knowing a lot more

[@metaplexstudios2668]

Currently dealing with this in the "ETF" KOLD.

[@chairman6652]

Thanks Patrick . I was thinking about a short term Options play via a straddle if the ETN is Optionable . But is unsure about the daily rebalancing . Be glad to hear your thoughts . Or should I just stay away from them .👌

[@tcaporale3192]

Great lecture. We'll done.

[@toddcott9510]

Brilliant video.

[@oaklyfoundation]

Wait is this bull and bear certificates? I would like a video regarding how to short the stock market and what types of tools is good for that.

[@EckosamaGhostTsushima]

i dont understand. Are leverages ETFs also bad, like 3x exposure tech etfs long, SOXL for example. or is the fact that its a traded note?

[@thefreeaccount0]

ETNs can be 100% debt-based instruments. In other words, the issuer has no obligation to take any position in the underlying. ETFs are funds that are required to invest in the underlying using a specific strategy. To answer the question, "Is this ETF bad?," all you generally need to do is to put yourself in the position of an investor who can buy or sell equities/options/futures in order to obtain the return objective of the ETF. Not so for ETNs. The positives for ETNs: * Not necessarily subject to monthly/weekly futures/options rollover - they can, in theory, use any investment strategy, as long as they pay you the index returns when you close your position. * Credit risk vs equity risk - even if an ETN can't theoretically pay all its investors the required returns, it could just continue to trade below NAV until the very end when investors withdraw enough money to render it insolvent. The positives for ETFs: * Required to invest your money, so they can't be some sort of bank scheme. * Should always trade at/very close to NAV. * ETFs are kind of a US thing. Because SEC, it would be hard for an ETF issuer to do worse to you than convert to an ETN. That would not be desirable for the issuer, because you would become a creditor. The difference between ETNs and ETFs is a lot like the difference between CFD brokers and traditional exchange-regulated brokers. They could both screw you over, but in different ways.

[@EckosamaGhostTsushima]

@@thefreeaccount0 thank you. I am staying miles away from ETNs. But theres so many ETFs that I love. and I am diversifying even when it comes to ETFs, some have good growth some good dividends. Im glad you answered my question. If an ETF converted to ETN which is impossible i would be horrified. I get the idea behind ETNs, but because of their high risk, your not really just investing, your also kind of gambling at that point. and there are other high risk investments out there instead.

[@thefreeaccount0]

​@@EckosamaGhostTsushima Yikes...I think I may have given you the wrong idea. It's entirely possible for an ETF to be converted to an ETN. There haven't been any horrible ETF liquidation stories here in the US because the SEC might sanction or ban the instruments or the issuers (like they did to CFDs), not because they are any less risky. To clarify: there have been quite a few leveraged ETF failures in the US. It's just that the investors did not loose their money. To evaluate leveraged ETFs, just think about how you would create that product if you were the issuer. It probably wouldn't be a very safe long-term investment for your customers.

[@EckosamaGhostTsushima]

@@thefreeaccount0 oh no! i got it now thanks. I know of a few etfs that we shut down in recent years so I understand. As long as they return the money invested even at a loss im fine. I will check if the ETFs do turn into ETNs and will stay away from ETNs. I get what your saying about long term. I am also looking into mutual funds now, and still going to diversify. this is really helpful. I still hold a few ETFs. but I am still researching. Its surprising that very few stock channels go over what we discussed and what the video discusses.

[@thefreeaccount0]

@@EckosamaGhostTsushima Negative...you still do not get it. If you don't understand how a leveraged ETF is constructed, why would you invest in it?

[@theObscure3rd]

Really great video Mr Boyle. (IMHO) I think we also put too little responsibility on Retail Investors, there should be more emphasis on Retail Investors to also do a bit more research for themselves and not just always point to the "big bad institution". This principle of blaming institutions and having people not take responsibility for themselves is going to eventually hurt our societies and at some point trample on individual rights. The responsibility for the individual to empower and equip themselves is very important to promote along side making sure institutions are properly regulated and monitored against taking advantage of people. It has to go both ways.

[@williamchamberlain2263]

Can a financial advisor sell an instrument which will on average lose money over the period that the client is investing for?

[@jkf3169]

@@williamchamberlain2263 yes, as long as the client is informed of the risk.

[@jchong416]

You sartorial game matches your market knowledge

[@hogavii6980]

Have a great day as well

[@christopherwalsh3101]

hes could've just popped his savings into a tech etf during the bottom of the dip, and 3x his money!

[@EckosamaGhostTsushima]

thank you that answers another question of mine. Why did he not get SOXL and or why on earth did he put in 800k on one any asset period. thats just insane. not even buying gold real estate. even legos at that point would be better, and yes some ppl do do that. i wouldnt advise it but at least he would have money.

[@dam716]

@@EckosamaGhostTsushima What's your take on SOXL? Forward Split tomorrow

[@michaelgordon3241]

i am in profits on usoi, slvo and smhb all in profits..but plan on selling 6-12 months..whenever i feel a top has been reached

[@kiwihello2]

If the S&P 500 or any other security goes down 10% one day and then goes up 10% one would lose money even from the non-levereged instrument. Suppose you start with $1,000 at the end of the first day you are going to have $900. At the end of the second day you will have $990 ( $900 + 10%). So not a good comparison. 😁 For the index to recover completely on the second day (to $1,000) it will need to go up 11.11(1)% (($1,000 / $900 - 1) x 100%) 😁

[@PBoyle]

if the index started at 1000, fell to 900 one day and rose back to 1000 the day after, you would break even on the index and lose money on the levered ETN.

[@kiwihello2]

@@PBoyle This, now is correct :) . Making your case of caution to leveraged ETPs. I was just reflecting on the specific detail that if an investment goes down 10% (or any percentage) it takes more going up, as a percentage number, to get even. I am compelled to do a detailed study on: in which situations a leveraged instrument can give you an advantage. Without researching further I expect a leveraged instrument to give you a great advantage in a grouped / clustered sequence of up days because of the compound growth. A compound loss (several days of losses) should be less of an issue because compound negative growth is less steep than a compound growth. Compound loss of equal down days (equal percentages let day) is smaller and smaller in absolute numbers. Like in a sequence of -1% days the fall will be smaller and smaller in absolute value every day. In a sequence of +1% growth the growth in absolute number grows exponentially.

[@VOLightPortal]

Yes, if you lose 50%, you will need to make 100% to break even. Lose 90% and you will need 900% to break even. Holding onto LevETNs for long term make no sense.

[@azamarabear]

Wow great content ... thx

[@meegz149]

Is bnku as risky as these other ETNs? Seems to be tracking a sector less nebulous than commodities.

[@P37RU5]

Very well. Explained

[@pfeilspitze]

I made money on SVXY back in the day. Wasn't in for the big crash, though, and now Vanguard won't let me buy it 😂

[@maxyasunaga2611]

Can you make a video on why inflation is muted despite QE and capital injection into the markets?

[@PBoyle]

I have a video coming out in the next few days where I interview an expert on this topic. Hopefully you will enjoy it. It should be the next video out.

[@antoniobergara7878]

Is it possible to short this kind of leveraged ETN or ETFs?

[@kimthiennguyen3710]

I have a question what usually happens to a company in time of war especially when the company is in the defeated side?

[@malusidumakude6808]

Sir what is the name of your book

[@PBoyle]

I have three books, Trading and Pricing Financial Derivatives, Statistics for the Trading Floor and Corporate Finance, Investment and Advisory Applications.

[@malusidumakude6808]

@@PBoyle Thanx alot for the reply, i absolutely enjoy how you make complex topics so easy to understand. You the best👍🏼

[@johnlee2540]

Good day👍

[@PBoyle]

You too

[@tradelogikk7876]

ETF/ETN's are best left for active traders IMO.

[@Cusnpbzn]

yeah i could never understand why MORL even existed. Until i looked at the yield. Then I really really didn't understand how it could exist.

[@leonhardeuler4292]

Dad one question.. Why not just buy Call options with 1 year expire and a put also 1 year till expiry. Wont that be 100% ride to the moon? Or use online options uhhh price loss calculator and sell the options mid way and reposition if they never turn a profit? Or maybe f strategy and spy calls end of week my school tuition? lmk papa BoYlE

[@ac-ir9gs]

Nice suit

[@ThaiEgho]

In the EU you cant even buy the SPY etf. Which is a little excessive protection.

[@ellenorbjornsdottir1166]

So, ETNs are the bank playing bookkeeper

[@raymondcaylor6292]

Man that's a brutal loss. Wondering after entering wasn't there some eay to escape. I mean a 50% loss is better than 100. What could he of done to exit!

[@VOLightPortal]

With 3X leveraged ETNs you can now experience the joys of losing 150% of your capital.

[@andre-nunes]

CEFs would’ve been a better option for him

[@samd8016]

March 2020, TVIX went from $25 to $1000. I am sure Ackerman who shorted the market took advantage. Some people are able to move the market the way they want. We retail investors have no power. We can only hold and pray assets that do not decay over time.

[@balramhhh9080]

I think god heard ur pray in the form of WSB

[@remlatzargonix1329]

I feel bad for investors who lose all their money, or anyone who does so, BUT does no ever follow the old maxim "Don't have ALL your eggs in the same basket?......Doesn't anyone diversify anymore??

[@JoelChenFa]

GME DIAMOND HANDS! I would settle for investors doing due diligence honestly. Diversification is too hard for them to understand.

[@HansLasser]

@@JoelChenFa How is difficult to understand? Such examples leave me always wondering.

[@rooseveltbrentwood9654]

Why on earth would you put that much of your money in one thing? When you hear about people loosing everything in the stock market it’s alway because they were into concentrated positions and the word leverage is usually involved.

[@joeyjo-jojuniorshabadoo6827]

There is probably a grandpa somewhere who had lost all his savings on a penny stock that went to 0, as well. That does not imply we should have an irrational fear of investing in the stock market in general. Cherry picking some sob story is dishonest. TQQQ has had >7500% return over the last ten years (it went from ~2 to ~150). TQQQ has nearly doubled since the making of this video. Why is nobody mentioning the leveraged ETFs or ETNs that aren't junk. Another example of an ETN that probably isn't going to 0 is SDYL which also pays a decent dividend. Recommending TQQQ as a buy and hold right now is probably an awful idea but these money printing machines should be on everyone's list for the next big market correction.

[@MrIVofThetaGang]

It is not dishonest. Leveraged funds are not designed to be long-term buy and hold. If you disagree with this, you haven't read the prospectus. Investors in the Fund should actively manage and monitor their investments, as frequently as daily. An investor in the Fund could potentially lose the full principal value of his/ her investment within a single day. The Fund does not seek to achieve its stated investment objective over a period of time greater than a single day. TQQQ is not a buy and hold fund. The fund can and will eventually crash. Even the 2x ones are incredibly dangerous and have the same type of disclaimers. There's a reason its barred from most IRA/401k fund selections. Anyone who managed to buy and hold it for 7500% is just as if not more likely to be in on the fund's final day of operation when it join XIV in ET* Hell.

[@ronnie4661]

Lev etns should only be day trade imo

[@BabyYoda5555]

I think EVERY company that created and sold leveraged ETN’s should be forcibly closed and ALL the proceeds should go to investors of the ETN’s. Also every high level executive should be issued the death penalty. And this is coming from someone who did not invest in any of this garbage.

[@ProfAzimov]

Why?

[@BabyYoda5555]

@@ProfAzimov because they knew exactly what they were doing. They knew how it would ruin people’s investments, portfolios, and cost some people their lives. Yet they were perfectly fine with doing it anyways. That’s evil.

[@ProfAzimov]

​@MrDragonslayer89 The investors usually get documents that state the risks of a position. Why should investment banks bear the costs Investors have put on themselves? If they did not disclose these, then that should happen.

[@BabyYoda5555]

@@ProfAzimov often times the investors were not informed of the risks. They received very complicated financial documents (sometimes) that buried how leveraged and inverse ETN’s worked. But even in these cases trained financial advisors had trouble deciphering them. You would think logically that if you buy a 3X SPY ETN that when SPY went up 10% your investment would increase 30%. That’s NOT how they worked. This is a very complex issue and I would encourage you to look into it. But essentially all leveraged ETN’s were specifically created to steal from their investors at the benefit of the issuers. The faster they made this happen the more they profited.

[@williamchamberlain2263]

2006? Uh-oh Barclays? _Uh-oh_ Credit Suisse? _Oh _*_no_*

[@infiltr80r]

Ah, XIV, good times.

[@adamcaruso6345]

Love it! I'm 25 and have my entire Roth IRA (over $45K) invested in 3x leveraged ETFs TQQQ and TMF. Results on my channel.

[@americopa1956]

These ETFs, ETNs, ETPs, ESNs, and dark pools all seems risky as fuck.. CDFs hold the same risk as bear stocks. Sounds like some big bank debt cerfuffle.

[@rooseveltbrentwood9654]

Nothing wrong with ETFs as long as they are transparent ETFs, it’s basically a mutual fund with sone differences. However the non-transparent ETFs seem shady and ripe for abuse.

[@ron6126]

I am selling my ETN's

[@christopherwalsh3101]

they should probably just not exist.

[@pierre1122]

I dont understand people who "invest" in ETN !!! For me 3 things : index ETF (SPY,XIU,QQQ), Bonds and ETF gold. Keep it simple.