Short-term investors seeking high risk and high returns can now buy the first quadruple leveraged fund that tracks the S&P 500 index. This is another sign that speculative sentiment in US stocks is becoming more and more fanatical.

On Tuesday local time, BMO Capital Markets launched the Max S&P 500 Index 4X Leveraged ETN Fund (MAX S&P 500 4X Leveraged ETN). This is the first fund of its kind seeking to generate a daily return of 4 times that of the S&P 500 Index. The launch of the fund overshadowed the 3x leveraged stock market fund popular with short-term traders.

This 4x leveraged fund is traded at NYSE ARCA under the code”$MAX S&P 500 4X LEVERAGED ETN (XXXX.US)$”, the management fee is 0.95%.

Some people expressed surprise that such a product could get regulatory approval. Because in 2017, two 4x leveraged ETF products proposed by ForceShares were ultimately rejected by the US Securities and Exchange Commission (SEC). Although the SEC initially approved a rule change that allows 4x leverage for ETFs, the agency ultimately decided to reconsider.

It should be pointed out that this quadruple leveraged fund is not an ETF (Exchange-Traded Fund), but an ETN (Exchange-Traded Note). Technically speaking, it is more like a debt instrument than a stock. Todd Sohn (Todd Sohn), an ETF analyst at Strategas Securities, said that this may cause XXXX to circumvent SEC regulations on leveraged ETFs.

Thorne said, “I think [the demand for leveraged products] will continue to grow as retail investors continue to adopt these products... Now retail traders can trade on mobile phones anytime, anywhere, and these products help meet this demand.”

As the fund was launched, Wall Street's bullish voice on the 2024 US stock outlook is getting louder and louder. Most of the losses experienced by the stock market during the 2022 bear market have been erased, and the major stock market average indices are less than 5% from their all-time highs.

Meanwhile, Bitcoin has surged more than 160% this year, another sign that risk appetite during the pandemic is returning.

Short-term traders who buy large amounts of these leveraged funds are usually looking for quick returns and buy and sell quickly rather than hold on for a long time. The risk of holding these leveraged funds for a long time can be high because although they can bring huge gains when the stock market rises, small adjustments in the stock market can also cause huge losses.

In the ETN's prospectus, BMO emphasized that the product is designed for experienced investors to conduct short-term transactions.

The prospectus stated, “These notes are riskier than securities with medium- to long-term investment goals, and are not suitable for investors who plan to hold for a period other than one day or adopt a 'buy and hold' strategy.”

As early as 2017, Joe Saluzzi (Joe Saluzzi), a partner at institutional broker Themis Trading, expressed opposition to 4x leveraged ETFs

“To some extent, the SEC must step in and say, 'Enough is enough. ' This is a stock market, not a casino,” he said at the time.

In an interview on Tuesday, Salouz said his comments from six years ago still apply.

“If you want to reach 3x or 4x, why not 10x? Why not 100 times? What are we doing here? Are we investing or gambling? Is this a stock market, or is this a casino?” According to Saluzzi.

Joe Saluzzi (Joe Saluzzi), a partner at institutional broker Themis Trading, questioned this, saying, “If you want to reach 3 times or 4 times, why not 10 times? Why isn't it 100 times? What are we doing here? Are we investing or gambling? Is this a stock market, or is this a casino?”

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