3 ms·
They may have a whitepaper or something, but the simplest way to generate higher returns in a bull market is just to use leverage. I can sell you an ETF that re
by imustbeevil 4y ago
They may have a whitepaper or something, but the simplest way to generate higher returns in a bull market is just to use leverage. I can sell you an ETF that returns 2x the NASDAQ, and use the money to buy a 3x and pocket the difference. It looks like I'm giving you a better return than the NASDAQ, but when the market goes down everything obviously collapses because it's only designed to work in one direction.
Of course, that sounds stupid as hell and you'd certainly hope that someone thought of something better, but this is exactly what happened with Terra/LUNA, except with more financial engineering to obfuscate the "if it goes down 25% we're fucked".
- MockObject 4y ago> use the money to buy a 3x What's a 3x?
- MauranKilom 4y agoSomeone who is willing to enter a "NASDAQ will go up" bet with you, where they pay you 3x the amount it went up when it does, and you pay them 3x (or some other number you agree on) the amount it went down when it does.
- MockObject 4y agoSo, someone predicting a sudden downturn in a bull market?
- imustbeevil 4y agoQQQ is security that tracks the NASDAQ (NASDAQ 1% up = QQQ 1% up). TQQQ is a security that tracks the NASDAQ x3. (NASDAQ 1% up = TQQQ 3% up). SQQQ is a security that tracks the NASDAQ Inverse x3. (NASDAQ 1% up = SQQQ 3% down). In the context of "using leverage to provide better than expected returns in a Bull market", someone can buy TQQQ, securitize/create derivative (this is exclusively what crypto does) that returns 1.5 times the NASDAQ, sell you that derivative, and if the NASDAQ goes up 5% (TQQQ 15%) you get 7.5% and they get 7.5% (and your money). If it goes down, you lose everything and they keep the money you gave them.