Alpha Exchange Victor Haghani, Founder and CIO, Elm Partners
18 snips
Dec 7, 2024 
Victor Haghani, the Founder and CIO of Elm Partners, dives deep into the volatile world of leveraged ETFs, particularly those tied to MicroStrategy and Bitcoin. He discusses the staggering risk investors face with products like MSTU and MSTX, detailing scenarios of potential massive losses. The conversation also explores the intricate relationship between MicroStrategy’s premium and Bitcoin prices. Haghani touches on new financial products targeting innovative strategies, making a compelling case for careful consideration in today’s high-risk trading landscape.
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Leveraged ETF Risks
- Leveraged ETFs, like those based on MicroStrategy (MSTR), amplify returns but also risks.
- Investors should carefully consider potential losses, especially if the underlying asset falls and volatility rises.
Leveraged ETF Mechanics
- Leveraged ETFs must constantly rebalance to maintain their leverage target.
- This creates pro-cyclical buying pressure when the underlying asset rises and selling pressure when it falls.
MSTR Volatility Spike
- MSTR's volatility increased significantly around Thanksgiving, impacting leveraged ETFs.
- The ETFs' large options positions introduce Vega risk, further complicating their risk profile.