OC TRADERS Leveraged ETF (LETF) Basics Oct 31, 2009 How I Trade Leveraged ETFs: Dec 5, 2009 (presentations can be downloaded at www.xsprofits.com ) Wally Eater, weater@aol.com

DISCLAIMERS Not a professional trader Not selling or soliciting anything Not suggesting trading leveraged ETFs is appropriate for you What works for me may not work for you Presentation is for information purposes only and does not represent an offering as defined by the SEC Acts of 1933-34 and subsequent amendments. Please hold Questions until end

EMAIL ASKED FOR QUESTIONS….. THANK YOU FOR REPLYING: Steve Fought Skip Griffin Pam McCord Phil Peralta Vince Amato Franklyn Arnett Ray Degolia Rick Edwards Presentation based on questions from individuals above

WHAT IS A LEVERAGED ETF? An ETF tracks an underlying index or investment in order to emulate performance. The goal is to give investors a way to mimic price. Leveraged ETFs intend to provide 2-3 times the return of the correlating asset. So if the tracked index rises 1% in a day, a 2x leveraged ETF seeks to rise 2% in a day. Inverse leveraged ETFs intend to achieve a positive return if an index declines in value. Leveraged ETFs are designed for day trading- not for swing or long term investments. (edited for brevity). SOURCE: http://www.thestreet.com/story/10593192/leveraged-etf-margin-rules-to-change.html New Rules (effective 12/1/09 )-- Increased margin requirements from 25% to 50% for 2x and to 75% for 3x. Inverse leveraged ETFs would increase from 30% to 60% (for 2x) and not to exceed 100% (for 3x).

WHY LEVERAGED ETFs? Leveraged returns (2-3x the average return of the index they seek to mimic) DAILY investment goals- NOT monthly or annual You’re a sophisticated, aggressive investor willing to accept substantial losses, understand leveraged characteristics & have time to manage daily position

WHAT ARE DOWNSIDES, “GOTCHA’s” & RISKS? High costs- can exceed 1% fees Huge price swings- + 50% daily performance Volume varies dramatically + 200% Market timing High portfolio turnover / day Tracking error vs underlying index Aggressive investment techniques Leverage- 2x to 3x plus margin until 12/1/09 Holding overnight- prices reset daily

WHAT ARE DOWNSIDES OR “GOTCHA’s” & RISKS? cont’d Adverse market conditions Risks of shorting instruments Inverse correlation Investing in equity securities Investing in small and mid cap companies Credit risk Risks of investing in concentrated sectors, geographic concentration May be banned by SEC or broker

EXAMPLE: RIFIN & FAZ (Russell 2000 financials, 3X inverse), Last 5 days, 30 days; 4h/1d Heikin candle

YOUR ADVICE & LEVERAGED ETF TRADER GROUP Do you have a way(s) to identify TREND REVERSALS (ie, such as the downtrend that changed to an uptrend in March, 2009)? Would you like information on a leveraged ETF trader group being formed? Name on clipboard. Dec 5 meeting (If demand): How I Trade Leveraged ETFs Contact: Wally Eater, weater@aol.com

A FEW RESOURCES (also search Google & Bing) List of leveraged ETFs traded on US / Canada Stock Exchanges (hot links to leveraged ETF providers): http://etf.stock-encyclopedia.com/category/leveraged-etfs.html Dissecting Leveraged ETF Returns: http://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp Leveraged ETFs: A Value Destruction Trap? http://seekingalpha.com/article/31195-leveraged-etfs-a-value-destruction-trap Leveraged ETF Ticker Symbols- All the 2x and 3x Return Info You Need http://www.darwinsfinance.com/leveraged-etf-ticker-symbols/

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