SEC approves quadruple-leveraged ETFs

Want a return of 400%?

Today the SEC approved a request to list and trade quadruple-leveraged ETFs, reports Reuters. One of the funds is designed to deliver 400% of the daily performance of S&P 500 stock index futures.

Investors reacted on Twitter with a mixture of disbelief and snark:

I’m waiting for the 100x ETF. It comes with a seat eject button in case the market drops 1%.

— Joseph Fahmy (@jfahmy) May 3, 2017

@ReformedBroker looking forward to the non-transparent 4x Bitcoin ETF inside of a blind trust. @EricBalchunas

— Angry Twellman (@S_Josephs_Ghost) May 3, 2017

@ReformedBroker Market participants are jonesing for that 4x inverse North Korea etf

— Dan Stewart (@stewpac17) May 3, 2017

The S&P 500 is currently down 0.22%.

The 4x ETF tracking the S&P 500 would be down 350% and your house would be repossessed.

— Irrelevant Investor (@michaelbatnick) May 3, 2017

Of course, using leveraged ETFs requires knowledge and training. And SRO requirements for leveraged strategies present further hurdles for advisors.

IIROC’s 2016 enforcement report highlights two cases of suitability using leveraged and inverse ETFs. In its report, IIROC says it completed “a number” of discipline cases against advisors who made unsuitable recommendations to purchase these ETFs.

Read: Leveraged ETFs can help advisors without options licences

Guidance for leveraged and inverse ETFs was published by IIROC in June 2009.

Also read:

An ETF to invest in ETFs

Leveraging life insurance policies

MFDA started the most disciplinary proceedings ever in 2016