Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion
TL/DR - So shorting MSTR Long 2X ETFs while owing MSTR stock, an arbitrage play.
Do these 2x ETFs track bitcoin or something else? Do Greenlight add on top of their short after MSTR buys, or is that an automatic effect of the makeup of the ETFs? I honestly don't understand the mechanism hinted at by the article.
I believe the two ETFs track the MSTR stock index, but at 2X leveraged. It sounds like Greenlight was shorting them, partially hedged by owning MSTR stock directly as well. Someone correct me if I'm wrong, but I'm assuming was the arbitrage trade was taking advantage of the volatility swings in price gap between the two positions.
The process of maintaining and rebalancing a leveraged ETF fund sounds complicated and quite the headache, with transaction costs that can eat into the investor's returns.
Here's an article that explains it in more detail:
https://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp
The process of maintaining and rebalancing a leveraged ETF fund sounds complicated and quite the headache, with transaction costs that can eat into the investor's returns.
Here's an article that explains it in more detail:
https://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp
Aha now I see, thank you. I haven't read the investopedia link yet, but I've read that the (btc-, not MSTR-based) ETF managers have their own trouble to keep it aligned with the underlying. It is done daily if I'm not mistaken, and at the end of the trading day. So I guess there's an opportunity for arbitrage if one is quick enough to exploit the (probably small) daily discrepancies in price.
If it's only that, it sounds like much too much work for the money. Just long btc ffs.
