Professional traders don't trade leveraged ETFs (ETNs) because they know the friction and carry built into them. A professional trader who wants to make a leveraged bet on S&P will just use e-mini futures.
You missed the point about create/redeem. When I create in SPY I can submit a basket+cash component equivalent to 50,000 shares and get back 50,000 SPY. For redeem, I can submit SPY and get back the equivalent basket and cash component.
ProShares Ultra QQQ (3x NASDAQ) had $5.4B in the trust as per Yahoo finance. The holdings [1] had $13.7B in swaps, $0.5B in treasuries and $2B in stock. How exactly would I create/redeem this basket in kind?
[1] https://www.proshares.com/funds/tqqq_daily_holdings.html
No, you can't. An authorized participant can.
All ETFs, by definition, involve creation and redemption mechanisms. It's what separates them from other ETPs.
> How exactly would I create/redeem this basket in kind?
You can't.
According to the prospectus [1], "in exchange for the deposit or delivery of a basket of assets (securities and/or cash)". Going into deeper mechanics [2], creation and redemption involve the AP entering into offsetting swaps with the ETP.
[1] https://www.proshares.com/media/prospectus/statutory_prospec...
[2] https://www.proshares.com/media/prospectus/statement_of_addi...
>You can't.
Thank You.
As to your earlier point about AP, the bar is pretty low in SPY because I used to work at desk that was one ;)
Nobody can honestly say this. Trading is about risk transfer. And risks sometimes come home to roost, which means portfolios can always lose money.
That said, broadly, yes. If something seems too complicated, don't buy it.
> Almost every ETF other than a vanilla bond/stock ETF is unadulterated toxic waste that has oozed out from the sewers of finance and will wipe out your capital
This is true, but not (just) because banks are venal. These products are designed for professional traders. There is hedging value, to certain corporates, for having a short-dated commodities future exchange traded product (ETP) leveraged at a benchmark rate. Particularly if that rate floats with the corporate's cost of capital.
> good ole fashioned bond/stock ETFs - if you cannot redeem/create it then don't touch it
Individual investors can never redeem or create ETF units. That's restricted to authorized participants (APs).
APs can create and destroy units of most leveraged ETFs. They can't do that for exchange-traded notes (ETNs), which is where most of the structured stuff lives.