Introduction to LETPs and other Structured Products
What they are & why they matter
Leveraged Exchange Traded Products (LETPs) are complex financial instruments 'designed' to appear to amplify returns on an underlying index or asset—often doubling or tripling the daily performance. While they may seem like powerful trading tools, LETPs are mathematically structured to decline over time, making them one of Wall Street’s most deceptive financial products. Investors are left playing 'hot potato', are you one of them?
Types of Structured Fraud – Exploitable for Profit.
LETPs are a category of Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) that use leverage to magnify daily price movements of an index, commodity, or financial asset.
01
Leveraged ETFs/ETNs
Seek to provide 2x or 3x the daily return of an index.
02
Inverse LETPs
Designed to profit from market declines by moving in the opposite direction of an index.
03
Covered Call - ETFs
Claim to benefit investors by generating income - the truth is more sinister
While these products are marketed as sophisticated trading tools, their daily compounding mechanism leads to severe losses over time, even when the underlying index moves sideways
The Fraud Mechanism: Why LETPs Are Designed to Fail
Wall Street’s appetite for profit knows no bounds, and leveraged exchange-traded
products (LETPs) are at the center of this scheme. Learn how these products are:
01
The Daily Reset Trap
Unlike traditional investments, LETPs reset daily, meaning their performance over time does not align with the underlying index. This results in a phenomenon called decay, which systematically erodes their value over time. "If I sell you snake oil that doesn’t cure cancer, is it really any different from selling investors a financial product designed to trend toward zero?"
Example:
If an index gains 10% on Day 1 and loses 10% on Day 2, a standard investor breaks even.
A 2x leveraged ETF, however, gains 20% on Day 1 and loses 20% on Day 2—resulting in an overall loss instead of breaking even.
Over weeks and months, these losses accumulate, ensuring that LETPs steadily decline in value.
02
Reverse Splits: The Hidden Reset Button
To keep LETPs tradable and attractive, issuers execute reverse stock splits, artificially inflating prices after significant losses, consolidating the share count and then simply reissue the consolidated shares and more!
Example:
An LETP that falls from $100 to $5 may undergo a 1-for-20 reverse split, bringing its price back to $100.
This allows issuers to issue new shares at $100 freely. Without reverse splits, products like UVXY, BOIL, JDST, SQQQ, DUST, and SOXS would be worth mere fractions of a penny.
03
Systematic Wealth Transfer
LETPs do not create value for investors in aggrigate. Instead, they are structured to move money from retail traders to Wall Street institutions through:
Embedded Decay - Every Dollar you Lose Enriches Wall Street
Misleading marketing emphasizing short-term gains
Regulatory loopholes that allow them to be widely sold despite high risks
How to Protect Yourself from LETPs
Wall Street’s appetite for profit knows no bounds, and leveraged exchange-traded
products (LETPs) are at the center of this scheme.
Since LETPs are not designed for long-term investment, retail investors should be cautious before buying these products. Consider shorting the paired product - at least math is on your side if you do.
01
Avoid Holding LETPs
Long-Term
Products with “Leveraged” or “Inverse” in their name; high expense ratios and daily reset mechanisms and a history of reverse splits, which signal long-term underperformance.
02
Identify Red Flags in Investment Portfolios
03
Consider Safer Investment Alternatives
Rather than LETPs, investors should focus on: Traditional ETFs tracking stable indexes; Long-term diversified portfolios and Direct investment in companies with strong fundamentals. If you want leverage there are far better ways than LETPs
