If Bitcoin futures prices get too high relative to spot arbitragers are natural sellers and if the futures prices get too low they are natural buyers. Their buying and selling actions naturally counteract price distortions between markets. If they’re somehow prevented from acting (e.g., if shorting Bitcoin was forbidden) then the futures market would likely become decoupled from the underlying spot price—not a good thing.
Most swap agreements entered into by a Fund (but generally not CDS) calculate and settle the obligations of the parties to the agreement on a “net basis” with a single payment. Consequently, a Fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). Other swap agreements, such as CDS, may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of the reference entity.
No, the successful trader is not me. I’ve gotten lucky a few times and I’m still refining and trying out strategies; on the other hand, I’m part of communities of people who trade on a daily basis to grow their portfolios, and while some of the results can be attributed to luck, a majority of it is based on fundamentals, good habits, and experience.
application of the PFIC rules, certain excess distributions might have been classified as capital gains. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Fund held the PFIC shares. If a Fund receives an excess distribution with respect to PFIC stock, the Fund will itself be subject to tax on the portion of an excess distribution that is allocated to prior taxable years without the ability to reduce such tax by making distributions to Fund shareholders, and an interest factor will be added to the tax as if the tax had been payable in such prior taxable years.
• Non-Diversification Risk — The Fund is classified as “non-diversified” under the 1940 Act, and has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers susceptible to a single economic, political or regulatory event, or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund’s volatility and cause performance of a relatively smaller number of issuers or the credit of one or a relatively smaller number of counterparties to have a greater impact on the Fund’s performance. This risk may be particularly acute if the Fund is comprised of a small number of securities. Notwithstanding the Fund’s status as a “non-diversified” investment company under the 1940 Act, the Fund intends to qualify as a “regulated investment company” accorded special tax treatment under the Internal Revenue Code, which imposes its own diversification requirements that are less restrictive than the requirements applicable to “diversified” investment companies under the 1940 Act.
For purposes of this SAI, the word “invest” refers to a Fund directly and indirectly investing in securities or other instruments. Similarly, when used in this SAI, the word “investment” refers to a Fund’s direct and indirect investments in securities and other instruments. For example, the Funds typically invest indirectly in securities or instruments by using financial instruments with economic exposure similar to those securities or instruments.
Each Fund may purchase or sell futures contracts and options thereon as a substitute for a comparable market position in the underlying securities or to satisfy regulatory requirements. A physical-settlement futures contract generally obligates the seller to deliver (and the purchaser to take delivery of) a specified asset on the expiration date of the contract. A cash-settled futures contract obligates the seller to deliver (and the purchaser to accept) an amount of cash equal to a specific dollar amount (the contract multiplier) multiplied by the difference between the final settlement price of a specific futures contract and the price at which the agreement is made. No physical delivery of the underlying asset is made. 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 will each invest in cash-settled futures contracts where commodities are the underlying asset. 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 intend to achieve this exposure through investment in the ProShares Cayman Portfolio I, the ProShares Cayman Crude Oil Portfolio, the ProShares Cayman Bitcoin Futures Strategy Portfolio ProShares Cayman Short Bitcoin Futures Strategy Portfolio, ProShares Cayman Bitcoin Futures/Equity Strategy Portfolio and ProShares Cayman Bitcoin/Blockchain Strategy Portfolio, respectively, which may invest in futures contracts and options thereon.
Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.
In general, the Code defines (1) “short-term capital gain dividends” as distributions of net short-term capital gains in excess of net long-term capital losses and (2) “interest-related dividends” as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, in each case to the extent such distributions are properly reported as such by a Fund in a written notice to shareholders.
In traditional financial markets, derivatives are used as speculation objects as well as insurance against losses. The latter is known as hedging. One popular variety of derivatives used for hedging are called futures. A future is a contract between two parties in which one party agrees to pay the other a predetermined amount of money for an underlying asset at a specific point in time.