While Stockpile allows and supports Exchanged-Traded Fund securities (“ETFs”), Leveraged, Inverse & Leveraged Inverse ETFs, commonly referred to in the securities industry as LIETFs, are complex securities products that may not be a good fit for many of our customers and therefore are not supported by the Stockpile trading platform.
What are LIETFs?
Generally, a Leveraged ETF is designed to provide a multiple (e.g., two times) of the performance of the index, benchmark, or single-security it tracks. An Inverse ETF is designed to provide the opposite of the performance of the index, benchmark, or single-security it tracks. A Leveraged Inverse ETF is designed to provide a multiple of the opposite of the performance of the index, benchmark, or single-security it tracks. LIETFs are intended to be traded within one day and typically seek to achieve their investment objectives on a daily basis (i.e., over one trading session). The prospectuses for LIETFs provide instructions to trade these securities throughout the day. When held for longer than one day, the performance of LIETFs can differ significantly from the performance (or the inverse of the performance) of their underlying index, benchmark, or single security over the same time period. This effect can compound the longer the product is held, resulting in large and unexpected losses, particularly in volatile markets.
Why LIETFs are not approved securities on Stockpile’s trading platform
As noted in Stockpile’s Terms and Conditions, when you use the Stockpile app to place a trade in a stock, you receive a market on-close price of the stock at the end of the trading day. Since you do not have the ability to trade LIETFs throughout the trading day, the proper trading of LIETFs cannot be achieved. This trading limitation, in addition to the complexity, volatility, and related risk with trading LIETFs, has led Stockpile to determine that it is not in its customers’ best interest to allow LIETFs to be traded on its platform. If you transferred your account in from another brokerage firm and own a LIETF in that account, you will be able to sell the LIETF. However, purchases of LIETFs are not allowed.
To obtain additional educational information about LIETFs, you can access the following links: