Re:Individual Investors Get Burned by Collapse of Complex Se...
by JumpCrisscross on Monday June 01, 2020 @05:40PM
(#23384266)
> When I create in SPY I can submit a basket+cash component equivalent to 50,000 shares and get back 50,000 SPY
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...
Re:Individual Investors Get Burned by Collapse of Complex Se...
by haltingproblem on Monday June 01, 2020 @05:46PM
(#23384338)
>> How exactly would I create/redeem this basket in kind?
>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 ;)
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