Market Spotlight – Bitcoin - A cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography to secure transactions, control creation, and verify transactions. The first such cryptocurrency, Bitcoin, was introduced in 2009. In 2017, the exchanges launched a Bitcoin futures contract. The CBOE contract launched on Sunday, December 10, while the CME contract launched on Monday, December 18.
Market conditions should be considered favorable to a Fund when such conditions make it more likely that the value of an investment in that Fund will increase. Market conditions should be considered adverse to a Fund when such conditions make it more likely that the value of an investment in that Fund will decrease. For example, market conditions that cause the level of the S&P 500® to rise are considered “favorable” to the Ultra S&P500® and are considered “adverse” to the Short S&P500®.
Slippage is when the actual price we execute at is different from what we expect. In this case, a perfect market would let us sell the bitcoin and settle the future at precisely the same time and price. But in practice, market imperfections and Bitcoin volatility could lead to the price moving between the two trades, wiping out profits or putting you in the red.
  •   Bitcoin is available for trading 24-hours a day globally and, as such, the price of bitcoin may change dramatically when the market for bitcoin futures contracts is closed or when Fund shares are not available for trading on the Exchange. The price of bitcoin may change dramatically at times when investors are unable to buy or sell Fund shares.
Taking their prices from bitcoin futures, the swaps will not handle bitcoin directly. Seeing as Morgan Stanley is a regulated and established financial institution, tying the product to futures contracts is a safer bet than basing them on bitcoin’s spot price, as the Chicago Mercantile Exchange and Chicago Board of Exchange offer fully-regulated bitcoin futures from which Morgan Stanley can pool pricing data.
One traditional attraction of trading futures is the ability to use relatively small amounts of money to potentially achieve outsized returns. In many futures markets the margin, the amount of money that your broker requires up-front before executing the trade can be quite small compared to the ultimate value of the contract. For example, as of 22-Dec-2017, each E-mini S&P 500 contract was worth $134K ($50*S&P 500 index value)—this “list price” of the contract is called its notional value.  The CME only requires you to maintain a minimum margin of $4.5K (3.4% of notional) to control this contract (brokers often require additional margin). Margin requirements this low are only possible because the volatility of the S&P 500 is well understood and your margin account balance is adjusted at the end of every trading day to account for the winnings or losses of the day. If your account balance falls below the margin minimum of $4.5K you’ll need to quickly add money to your account or your position will be summarily closed out by your broker. On the plus side, if you’ve predicted the S&P’s direction correctly your profits will be that same as if you completely owned the underlying stocks in the index. A +1% daily move in the S&P500 would yield $1340 in profit even though you only have $4500 invested— a 29% return—this multiplier effect is called leverage.
A Fund will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. A Fund will realize a gain if the price of the security declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss will be increased, by the amount of the premium, dividends or interest a Fund may be required to pay, if any, in connection with a short sale.

•   ETN Risk — The Fund is likely to obtain substantial exposure to the price movements of bitcoin by holding ETNs that provide exposure to the price of bitcoin. ETNs are unsecured, unsubordinated debt securities of an issuer that are listed and traded on a U.S. stock exchange. An ETN’s returns are generally linked to the performance of a particular market benchmark or strategy minus applicable fees. ETNs do not provide principal protection and may or may not make periodic coupon payments. ETNs are subject to credit risk, which is the risk that the issuer cannot pay interest or repay principal when it is due. Additionally, the value of an ETN may be influenced by time to maturity, level of supply and demand, volatility and lack of liquidity in the underlying market (e.g., the commodities market), changes in interest rates or the issuer’s credit rating, and other economic, legal, political or geographic events. The value of an investment in an ETN may be impacted by fees associated with the ETN. Structural aspects of the ETNs may impact their market value. Trading by affiliates of an ETN sponsor may create conflicts of interest. The issuer of an ETN may be unable to meet its obligations. The potential impact of Bitcoin Network forks on the value of a bitcoin ETN is unclear. ETNs issued by special purpose vehicles may include greater risk. ETNs are subject to risks associated with the underlying asset.
Several factors may affect a Fund’s ability to achieve a high degree of correlation with its benchmark. Among these factors are: (i) a Fund’s fees and expenses, including brokerage (which may be increased by high portfolio turnover) and the costs associated with the use of derivatives; (ii) less than all of the securities underlying a Fund’s benchmark being held by the Fund and/or securities not included in its benchmark being held by a Fund; (iii) an imperfect correlation between the performance of instruments held by a Fund, such as futures contracts, and the performance of the underlying securities in a benchmark; (iv) bid-ask spreads (the effect of which may be increased by portfolio turnover); (v) holding instruments traded in a market that has become illiquid or disrupted; (vi) a Fund’s share prices being rounded to the nearest cent; (vii) changes to the benchmark that are not disseminated in advance; (viii) the need to conform a Fund’s portfolio holdings to comply with investment restrictions or policies or regulatory or tax law requirements;
The Funds may purchase and write options on indexes to create investment exposure consistent with their investment objectives, to hedge or limit the exposure of their positions, or to create synthetic money market positions. An index fluctuates with changes in the market values of the assets included in the index. Options on indexes give the holder the right to receive an amount of cash upon exercise of the option. Receipt of this cash amount will depend upon the closing level of the index upon which the option is based being greater than (in the case of a call) or less than (in the case of a put) the level at which the exercise price of the option is set. The amount of cash received, if any, will be the difference between the closing price level of the index and the exercise price of the option, multiplied by a specified dollar multiple. The writer (seller) of the option is obligated, in return for the premiums received from the purchaser of the option, to make delivery of this amount to the purchaser. All settlements of index options transactions are in cash.
•	 	Rolling Futures Contract Risk — The Fund will invest in and have exposure to bitcoin futures contracts and is subject to risks related to “rolling” such contracts. Rolling occurs when the Fund closes out of a futures contract as it nears its expiration and replaces it with a contract that has a later expiration. The Fund does not intend to hold futures contracts through expiration, but instead intends to “roll” its futures positions. When the market for these futures contracts is such that the prices are higher in the more distant delivery months than in the nearer delivery months, the sale during the course of the rolling process of the more nearby contract would take place at a price that is lower than the price of the more distant contract. This pattern of higher futures contract prices for longer expiration contracts is often referred to as “contango.” Alternatively, when the market for futures contracts is such that the prices are higher in the nearer months than in the more distant months, the sale during the course of the rolling process of the more nearby contract would take place at a price that is higher than the price of the more distant contract. This pattern of higher futures prices for shorter expiration futures contracts is referred to as “backwardation.” Extended periods of contango could cause significant losses for the Fund. The Advisor will utilize active management techniques to seek to mitigate the negative impact or, in certain cases, benefit from the contango or backwardation present in the various futures contract markets, but there can be no guarantee that it will be successful in doing so.

  •   Theft, loss or destruction. Transacting on a blockchain depends in part specifically on the use of cryptographic keys that are required to access a user’s account (or “wallet”). The theft, loss or destruction of these keys impairs the value of ownership claims users have over the relevant assets being represented by the ledger (whether “smart contracts,” securities, currency or other digital assets). The theft, loss or destruction of private or public keys needed to transact on a blockchain could also adversely affect a blockchain company’s business or operations if it were dependent on the ledger.

Bitrex provides comprehensive vetting of new Cryptocurrency tokens and places a strong emphasis on user security. Hence has the reputation for being a secure wallet with a good security module. The platform trades vastly in Altcoin. Trading fees at the platform are 0.25 %. The minimum transaction fee of the blockchain governs the charge for deposit and withdrawal.
Since a portion of the Fund’s assets are invested in short positions in bitcoin futures contracts, the Fund will likely decline in value when the price of bitcoin futures contracts goes up (unless such losses are offset by gains in the value of the Fund’s positions in other investments), a result that is the opposite from the results of taking long positions in bitcoin futures contracts.
Municipal notes with maturities of three years or less are usually given note ratings (designated SP-1 or SP-2) to distinguish more clearly the credit quality of notes as compared to bonds. Notes rated SP-1 have a very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are given the designation of SP-1+. Notes rated SP-2 have a satisfactory capacity to pay principal and interest.
It is important to note, however, that leverage means that your potential losses may also be much higher. If pork belly prices fall, call options lose value in a much higher proportion than the pork bellies themselves. In the above example, if the price of pork bellies falls from 1,000 to 900 USD (by 10%), the price of call options may fall from 10.5 USD to almost zero, resulting in a near-total loss of your funds instead of a small loss of just 10%.
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