The value of the bitcoin futures contracts is generally based on the expected value of bitcoin at a future point in time, specifically, the expiration date of the bitcoin futures contracts. Other factors, such as cost of mining, storing and securing bitcoin may affect the value of bitcoin futures. A change in the price of bitcoin today (sometimes referred to as the “spot” price) will not necessarily result in a corresponding movement in the price of the bitcoin futures contracts since the price of the bitcoin futures contracts is based on expectations of the price of bitcoin at a future point in time. Additionally, there is no one centralized source for pricing bitcoin and pricing from one bitcoin exchange to the next can vary widely. Therefore, the value of the bitcoin futures contracts held by the Fund should not be expected to track the price of bitcoin on the Bitcoin Exchange Market.
The Advisor may give consideration to placing portfolio transactions with those brokers and dealers that also furnish research and other execution related services to the Fund or the Advisor. Such services may include, but are not limited to, any one or more of the following: information as to the availability of securities for purchase or sale; statistical or factual information or opinions pertaining to investment; information about market conditions generally; equipment that facilitates and improves trade execution; and appraisals or evaluations of portfolio securities.
ProShare Advisors believes that its compensation program is competitively positioned to attract and retain high-caliber investment professionals. The compensation package for portfolio managers consists of a fixed base salary, an annual incentive bonus opportunity and a competitive benefits package. A portfolio manager’s salary compensation is designed to be competitive with the marketplace and reflect a portfolio manager’s relative experience and contribution to the firm. Fixed base salary compensation is reviewed and adjusted annually to reflect increases in the cost of living and market rates.
(ix) limit-up or limit-down trading halts on options or futures contracts which may prevent a Fund from purchasing or selling options or futures contracts; (x) early and unanticipated closings of the markets on which the holdings of a Fund trade, resulting in the inability of the Fund to execute intended portfolio transactions; and (xi) fluctuations in currency exchange rates.
The Board has appointed Michael L. Sapir to serve as Chairman of the Board. Mr. Sapir is also the Co-Founder and Chief Executive Officer of the Advisor and, as such, is not an Independent Trustee. The Chairman’s primary role is to participate in the preparation of the agenda for Board meetings, determine (with the advice of counsel) which matters need to be acted upon by the Board, and to ensure that the Board obtains all the information necessary to perform its functions and take action. The Chairman also presides at all meetings of the Board and acts, with the assistance of staff, as a liaison with service providers, officers, attorneys and the Independent Trustees between meetings. The Chairman may perform such other functions as may be requested by the Board from time to time. The Board does not have a lead Independent Trustee.
Localbitcoins is the portal that exchanges trades between person to person where you interact with the seller directly. On this platform, people from different countries can exchange their local currency to bitcoins. The site is suggested for casual traders seeking more privacy. The site uses an escrow system and the transfer of bitcoin is made after funds are received in the sellers account. Registering, buying and selling is completely free on localbitcoins while local bitcoin users who create advertisements charges 1% fee for every completed trade.
Credit Default Swaps (“CDS”): In the case of a CDS, the agreement will reference one or more debt securities or reference entities. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the contract until a credit event, such as a default, on a reference entity has occurred. If a credit event occurs, the seller generally must pay the buyer: a) the full notional value of the swap; or b) the difference between the notional value of the defaulted reference entity and the recovery price/rate for the defaulted reference entity. CDS are designed to reflect changes in credit quality, including events of default. The CDS Short North American HY Credit ETF will normally be a “buyer” of CDS (also referred to as a buyer of protection or a seller of risk). The CDS Short North American HY Credit ETF will primarily invest in centrally cleared, index-based CDS that provide credit exposure through a single trade to a basket of reference entities. The CDS Short North American HY Credit ETF may also invest in single-name CDS. Single-name CDS provide exposure to a single reference entity and are not centrally cleared.

The Board has not adopted a policy of monitoring for frequent purchases and redemptions of shares that appear to attempt to take advantage of potential arbitrage opportunities. The Board believes this is appropriate because ETFs, such as the Funds, are intended to be attractive to arbitrageurs, as trading activity is critical to ensuring that the market price of Fund shares remains at or close to NAV.

As discussed above in “Investment in a Subsidiary”, each of the Managed Futures Strategy ETF, the Crude Oil Strategy ETF the Bitcoin Futures Strategy ETF, the Short Bitcoin Futures Strategy ETF, the Blockchain/Bitcoin Strategy ETF, and the Bitcoin Futures/Equity Strategy ETF (each, a “Parent Fund”) intends to achieve commodity exposure through investment in a wholly-owned foreign subsidiary (each a “Subsidiary”). Each Subsidiary is classified as a corporation and is treated as a “controlled foreign corporation” (“CFC”) for U.S. federal income tax purposes. Each Parent Fund will limit its investments in its Subsidiary in the aggregate to 25% of the Parent Fund’s total assets. Each Parent Fund does not expect that income from its investment in its Subsidiary will be eligible to be treated as qualified dividend income or that distributions from its Subsidiary will be eligible for the corporate dividends-received deduction.
All three DBRS rating categories for short term debt use “(high)”, “(middle)” and “(low)” as subset grades to designate the relative standing of the credit within a particular rating category. The following comments provide separate definitions for the three grades in the Prime Credit Quality area, as this is where ratings for active borrowers in Canada continue to be heavily concentrated.
Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or "addresses").[53] Thereby, bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain.[53] Still, cryptocurrency exchanges are often required by law to collect the personal information of their users.[53]
The DJ Brookfield Global Infrastructure ETF, the Global Listed Private Equity ETF, the Merger ETF, the MSCI EAFE Dividend Growers ETF, and the MSCI Europe Dividend Growers ETF contain portfolio investments that are primarily listed or traded on foreign markets. To the extent a Fund’s portfolio investments trade in foreign markets on days when a Fund is not open for business or when the primary exchange for the Shares is not open, the value of the Fund’s assets may vary and shareholders may not be able to purchase or sell Fund Shares and Authorized Participants may not be able to create or redeem Creation Units. Also, certain portfolio investments may not be traded on days a Fund is open for business.
There may be circumstances outside the control of the Advisor, Trust, Administrator (as defined below), transfer agent, Custodian (as defined below), any sub-custodian, Distributor (as defined below), and/or a Fund that make it, for all practical purposes, impossible to re-position such Fund and/or to process a purchase or redemption order. Examples of such circumstances include: natural disasters; public service disruptions or utility problems such as those caused by fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the aforementioned parties, as well as the DTC, the NSCC, or any other participant in the purchase process; and similar extraordinary events. Accordingly, while the Advisor has implemented and tested a business continuity plan that transfers functions of any disrupted facility to another location and has effected a disaster recovery plan, circumstances, such as those above, may prevent a Fund from being operated in a manner consistent with its investment objective and/or principal investment strategies.
As of September 16, 2017, the Trustees and officers of the Trust, as a group, owned outstanding shares that entitled them to give voting instructions with respect to less than one percent of the shares of any series of the Trust; except that Mr. Michael L. Sapir owned more than 25% of the outstanding shares of ProShares S&P 500 Ex-Financials ETF and ProShares S&P 500 Ex-Health Care ETF.
The investment techniques and strategies discussed below may be used by a Fund if, in the opinion of the Advisor, the techniques or strategies may be advantageous to the Fund. A Fund may reduce or eliminate its use of any of these techniques or strategies without changing the Fund’s fundamental policies. There is no assurance that any of the techniques or strategies listed below, or any of the other methods of investment available to a Fund, will result in the achievement of the Fund’s objectives. Also, there can be no assurance that any Fund will grow to, or maintain, an economically viable size, and management may determine to liquidate a Fund at a time that may not be opportune for shareholders.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
Assume there is 0 contracts open and 2 traders, and a new futures contract expiring in 7 days opens. You can "create" a contract by putting a limit sell order in the orderbook at a given price. If someone market buys that limit order, an open contract is created between you and the other trader. This is how you can go from a position of 0 to a negative exposure just by selling a contract.
RD – Restricted default. ‘RD’ ratings indicate an issuer that in Fitch’s opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:
•   Tax Risk — In order to qualify for the special tax treatment accorded a regulated investment company (“RIC”) and its shareholders, the Fund must derive at least 90% of its gross income for each taxable year from “qualifying income,” meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. The Fund’s pursuit of its investment strategies will potentially be limited by the Fund’s intention to qualify for such treatment and could adversely affect the Fund’s ability to so qualify. The Fund can make certain investments, the treatment of which for these purposes is unclear. If, in any year, the Fund were to fail to qualify for the special tax treatment accorded a RIC and its
ProShare Advisors is responsible for substantially all expenses of the Unitary Fee Funds except for: (i) brokerage and other transaction expenses and other fees, charges, taxes, levies or expenses (such as stamp taxes) incurred in connection with the execution of portfolio transactions or in connection with creation and redemption transactions (including without limitation any fees, charges, taxes, levies or expenses related to the purchase or sale of an amount of any currency, or the patriation or repatriation of any security or other asset, related to the execution of portfolio transactions or any creation or redemption transactions); (ii) legal fees or expenses in connection with any arbitration, litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith; (iii) compensation and expenses of the Independent Trustees; (iv) compensation and expenses of counsel to the Independent Trustees, (v) compensation and expenses of the Trust’s chief compliance officer and his or her staff; (vi) extraordinary expenses (in each case as determined by a majority of the Independent Trustees); (vii) distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act; (viii) interest and taxes of any kind or nature (including, but not limited to, income, excise, transfer and withholding taxes); (ix) fees and expense related to the provision of securities lending services; and (x) the fee payable to the Adviser. The internal expenses of pooled investment vehicles in which a Unitary Fee Fund may invest (acquired fund fees and expenses) are not expenses of such Unitary Fee Fund, and are not paid by ProShare Advisors. The payment or assumption by ProShare Advisors of any expenses of a Unitary Fee Fund that ProShare Advisors is not required by the investment advisory and management agreement to pay or assume shall not obligate ProShare Advisors to pay or assume the same or any similar expense of such Unitary Fee Fund, on any subsequent occasion.
Now, if that margin-call does not get filled and the price continues to fall, then I'm making profits on my contract but nobody is paying for it since the counterparty who got margin-called didn't get the liquidation order filled. So what happens is that at settlement time of the contract, that unfilled liquidation loss to the system will be deducted from the profits of ALL traders before they are distributed.
The value of the bitcoin futures contracts is generally based on the expected value of bitcoin at a future point in time, specifically, the expiration date of the bitcoin futures contracts. Other factors, such as cost of mining, storing and securing bitcoin may affect the value of bitcoin futures. A change in the price of bitcoin today (sometimes referred to as the “spot” price) will not necessarily result in a corresponding movement in the price of the bitcoin futures contracts since the price of the bitcoin futures contracts is based on expectations of the price of bitcoin at a future point in time. Additionally, there is no one centralized source for pricing bitcoin and pricing from one bitcoin exchange to the next can vary widely. Therefore, the value of the bitcoin futures contracts held by the Fund should not be expected to track the price of bitcoin on the Bitcoin Exchange Market.
There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as bitcoin result in high up-front costs to miners in the form of specialized hardware and software.[105] Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency can be permanently lost from local storage due to malware or data loss. This can also happen through the destruction of the physical media, effectively removing lost cryptocurrencies forever from their markets.[106]
There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as bitcoin result in high up-front costs to miners in the form of specialized hardware and software.[105] Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency can be permanently lost from local storage due to malware or data loss. This can also happen through the destruction of the physical media, effectively removing lost cryptocurrencies forever from their markets.[106]
It is also possible that other digital currencies, typically referred to as “alt-coins”, and trading systems could become more widely accepted and used than Bitcoin. In particular, the digital asset “ethereum” has acquired a substantial share of the cryptocurrency market in recent months, which may be in part due to perceived institutional backing and/or potentially advantageous features not incorporated into bitcoin. There are other cryptocurrencies gaining momentum as the price of the bitcoin continues to rise and investors see the cheaper cryptocurrencies as attractive alternatives. The continued rise of these alt-coins can lead to a reduction in demand for bitcoin, which could have an adverse effect on the price of bitcoin and may have an adverse impact on the performance of Bitcoin Instruments and the performance of the Funds.
These days, all of the BTC/USD contracts trading at active futures markets are inverse, as mentioned in the beginning of this guide. The only differences between the exchanges is how they trigger liquidations and the procedure for handling margin calls. They all use Bitcoin as the currency, of course, and you can use the table below for a basic feature comparison:
Never put all your eggs in one basket. Diversify. While the potential to earn more is increased with the amount of money you invest into a coin, the potential to lose more is also magnified. Another way to think about it is to look at the cryptocurrency market as a whole; if you believe that this is just the beginning, then more than likely the entire market cap of cryptocurrencies will increase. What are the chances that this market cap increase will be entirely driven by one coin vs. being driven by many coins? The best way to safely capture the overall growth of cryptocurrency is to diversify and reap the benefits of growth from multiple coins. Also, fun fact — Between January 2016 and January 2018, Corgicoin has increased by 60,000x, and Verge has increased by 13,000x. During the same period, Bitcoin has increased by 34x. While you would have gotten impressive gains from Bitcoin, expanding into other coins could have landed you potentially larger ones.

Furthermore, each Fund, except the Matching ProShares Funds, the Managed Futures Strategy ETF, the Crude Oil Strategy ETF, the CDS Short North American HY Credit ETF, the Bitcoin Futures Strategy ETF, the Short Bitcoin Futures Strategy ETF, the Blockchain/Bitcoin Strategy ETF, the Bitcoin Futures/Equity Strategy ETF has an investment objective to match the performance, a multiple (2x or 3x), the inverse (-1x) or a multiple of the inverse (-2x or -3x) of the performance of a benchmark on a single day. A “single day” is measured from the time the Fund calculates its NAV to the time of the Fund’s next NAV calculation. These Funds are subject to the correlation risks described above. In addition, while a close correlation of any Fund to its benchmark may be achieved on any single day, over time, the cumulative percentage increase or decrease in the NAV of the shares of a Fund may diverge, in some cases significantly, from the cumulative percentage decrease or increase in the benchmark due to a compounding effect as further described in the Prospectus and below.

There's a lot of ins and outs which can get confusing in arbitrage trading. We won't go into the technicals of why futures contracts trade at a premium to spot price. You can read a full explanation here. If it's not of interest to you, all you need to know is that there's a tendency, the further out in time the futures contract expires, for the premium to spot to be higher and higher in nominal percentage terms.
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