The
information in this prospectus is not complete and may be changed. The Fund may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
T-REX
2X INVERSE DRAM DAILY TARGET ETF
PROSPECTUS
________________,
2026
This
prospectus describes the T-REX 2X Inverse DRAM Daily Target ETF (the “Fund”)
which is authorized to offer one class of shares by this prospectus.
The
Fund seeks daily inverse leveraged investment results and are intended to be
used as short-term trading vehicles.
The
Fund is not intended to be used by, and is not appropriate for, investors who do
not intend to actively monitor and manage their portfolios. The Fund is
very different from most mutual funds and exchange-traded funds. Investors
should note that:
(1)
The Fund is riskier than alternatives that do not use leverage because the Fund
magnifies the performance of its underlying security.
(2)
With respect to the Inverse Funds, each Fund pursues a daily investment
objective that is inverse to the performance of its underlying security, a
result opposite of most mutual funds and ETFs.
(3)
The pursuit of its daily investment objective means that the return of the Fund
for a period longer than a full trading day will be the product of a series of
daily leveraged returns, for each trading day during the relevant period. As a
consequence, especially in periods of market volatility, the volatility of the
underlying security may affect the Fund’s return as much as, or more than, the
return of the underlying security. Further, the return for investors that invest
for periods less than a full trading day will not be the product of the return
of the Fund’s stated daily leveraged investment objective and the performance of
the underlying security for the full trading day. During periods of high
volatility, the Fund may not perform as expected and the Fund may have losses
when an investor may have expected gains if the Fund is held for a period that
is different than one trading day.
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by sophisticated investors, such as traders and active investors employing
dynamic strategies. Investors in the Fund should:
(1)
understand the risks associated with the use of leveraged
strategies;
(2)
understand the consequences of seeking daily
leveraged investment
results; and
(3)
intend to actively monitor and manage their investments.
Investors
who do not understand the Fund, or do not intend to actively manage their funds
and monitor their investments, should not buy the Fund.
There
is no assurance that the Fund will achieve its daily leveraged investment
objective and an investment in the Fund could lose money. The Fund is not a
complete investment program.
The
Fund’s investment adviser will not attempt to position the Fund’s portfolio to
ensure that the Fund does not gain or lose more than a maximum percentage of its
net asset value on a given trading day. As a consequence, if the Fund’s
underlying security moves more than 50%, on a given trading day in a direction
adverse to the Fund, the Fund’s investors would lose all of their
money.
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Fund |
Ticker |
Principal
U.S. Listing Exchange |
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T-REX
2X INVERSE DRAM DAILY TARGET ETF |
[
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[
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The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Table
of Contents
T-REX
2X INVERSE DRAM DAILY TARGET ETF
IMPORTANT
INFORMATION ABOUT THE FUND
The
T-REX 2X Inverse DRAM Daily Target ETF (the “Fund”) seeks daily
inverse investment
results and is very different from most other exchange-traded funds. The pursuit
of daily inverse investment goals means that the return of the Fund for a period
longer than a full trading day may have no resemblance to -200% of the return of
the publicly-traded shares of Roundhill Memory ETF (Cboe: DRAM) ("DRAM"). This
means that the return of the Fund for a period longer than a trading day will be
the result of each single day’s compounded return over the period, which will
very likely differ from -200% of the return of DRAM for that period. Longer
holding periods and higher volatility of DRAM increase the impact of compounding
on an investor’s returns. During periods of higher volatility, the volatility of
DRAM may affect the Fund’s return as much as, or more than, the return of DRAM.
Further, the return for investors that invest for periods longer or shorter than
a trading day should not be expected to be -200% of the performance of DRAM for
the period.
The
Fund is not suitable for all investors. The Fund is designed to be utilized
only by knowledgeable investors who understand the potential consequences of
seeking daily inverse (-2X) investment results, understand the risks associated
with the use of shorting and are willing to monitor their portfolios frequently.
The Fund is not intended to be used by, and is not appropriate for, investors
who do not intend to actively monitor and manage their portfolios. For periods
longer than a single day, the Fund will lose money if DRAM’s performance is
flat, and it is possible that the Fund will lose money even if DRAM’s
performance decreases over a period longer than a single day. An investor could
lose the full principal value of his/her investment within a single day if the
price of DRAM goes up by more than 50% in one trading day.
Investment
Objective
The
Fund seeks daily investment results, before fees and expenses, of 200% of
the
inverse (or opposite)
of the daily performance of DRAM. The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day.
Fees
and Expenses of the Fund
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This
table describes the fees and expenses that you may pay if you buy, hold,
and sell shares of the Fund. You
may pay other fees, such as brokerage commissions and other fees to
financial intermediaries, which are not reflected in the tables and
examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fee(1) |
1.50% |
| Distribution
(12b-1) and Services Fees |
0.00% |
|
Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses(2) |
1.50% |
(1)Under
the Investment Advisory Agreement, Tuttle Capital Management LLC (the
“Adviser”), at its own expense and without reimbursement from the Fund, pays all
of the expenses of the Fund, excluding the advisory fees, interest expenses,
taxes, acquired fund fees and expenses, brokerage commissions and any other
portfolio transaction-related expenses and fees arising out of transactions
effected on behalf of the Fund, credit facility fees and expenses, including
interest expenses, and litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund’s
business.
(2)The
cost of investing in swaps, including the embedded cost of the swap and the
operating expenses of the referenced assets, is an indirect expense that is not
included in the above fee table and is not reflected in the expense example. The
total indirect cost of investing in swaps, including the embedded cost of the
swap and the operating expenses of the referenced assets, is estimated to be
0.189% for the fiscal period ending December 31, 2026.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then hold or redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a five percent (5%) return each year and that the Fund’s
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
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| Name
of Fund |
1
Year |
3
Years |
| T-REX
2X Inverse DRAM Daily Target ETF |
$153 |
$474 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
As of the date of this Prospectus, the Fund has not yet commenced operations and
therefore does not have any portfolio turnover information
available.
Principal
Investment Strategies
The
Fund, under normal circumstances, invests at least 80% of its net assets (plus
any borrowings for investment purposes) in financial instruments that are
designed to provide, in the aggregate, 200% inverse (opposite) exposure to the
price performance of DRAM on a daily basis. The Fund may also seek to achieve
its investment objective by purchasing put options on DRAM or by engaging in
short sales of the shares of DRAM. The Adviser will determine the allocation of
the Fund’s investments in swap agreements, put options and short sales of DRAM
shares based upon various factors including, but not limited to, counterparty
capacity, financing charges, liquidity, collateral availability, and overall
market conditions for a particular instrument. Short sales of the shares of DRAM
are typically less efficient than the use of swap agreements because short sales
do not provide leveraged returns. This may result in the Fund not achieving
its -200% daily investment objective.
The
Fund will enter into one or more swap agreements with financial institutions
whereby the Fund and the financial institution will agree to exchange the return
earned on an investment by the Fund in DRAM that is equal, on a daily basis, to
-200% of the value of the Fund's net assets.
If
the Adviser determines to use put options,
the
Fund will purchase exchange traded put options, including “FLEX Options,” with
DRAM as the reference security. Put options give the holder (i.e.,
the buyer) the right to sell an asset and the seller (i.e.,
the writer) the obligation to purchase the asset at a certain defined price.
FLexible EXchange® Options (“FLEX Options”) are customized options contracts
that trade on an exchange but provide investors with the ability to customize
key contract terms like strike price, style and expiration date while achieving
price discovery in competitive, transparent auctions markets and avoiding the
counterparty exposure of over-the-counter (OTC) options positions. Like
traditional exchange-traded options, FLEX Options are guaranteed for settlement
by the OCC, a market clearinghouse that guarantees performance by counterparties
to certain derivatives contracts. The FLEX Options are listed on the Chicago
Board Options Exchange.
If
the Adviser determines to engage in short sales on the shares of DRAM, the Fund
will sell shares of DRAM that it has borrowed. When executing a short sale, the
Fund borrows the security from a third party and sells it at the then current
market price. The Fund is then obligated to buy the security on a later date and
return the security to the lender. The Fund will realize a profit if the price
of the underlying shares decreases or incur a loss if the price of the
underlying shares increases while the Fund is holding the borrowed security. The
Fund may reinvest the proceeds of its short sales.
The
Adviser attempts to consistently apply leverage to obtain short DRAM exposure
for the Fund equal to -200% of the value of its net assets and expects to
rebalance the Fund’s holdings daily to maintain such exposure. As a result of
its
investment
strategies, the Fund will be concentrated in the industry to which DRAM is
assigned (i.e.,
hold 25% or more of its total assets in investments that provide leveraged
exposure in the industry to which DRAM is assigned).
The
Fund will attempt to achieve its investment objective without regard to
overall market movement or the increase or decrease of the value of DRAM. At the
close of the markets each trading day, the Adviser rebalances the Fund’s
portfolio so that its exposure to DRAM is consistent with the Fund’s investment
objective. The impact of DRAM’s price movements during the day will affect
whether the Fund’s portfolio needs to be rebalanced. For example, if the price
of DRAM has fallen on a given day, net assets of the Fund should rise, meaning
that the Fund’s exposure will need to be increased. Conversely, if the price of
DRAM has risen on a given day, net assets of the Fund should fall, meaning the
Fund’s exposure will need to be reduced. This daily rebalancing typically
results in high portfolio turnover. On a day-to-day basis, the Fund is expected
to hold money market funds, deposit accounts with institutions with high quality
(investment grade) credit ratings, and/or short-term debt instruments that have
terms-to-maturity of less than 397 days and exhibit high quality (investment
grade) credit profiles, including U.S. government securities and repurchase
agreements.
The
Fund may invest in other exchange-traded funds for cash management purposes.
Such exchange-traded funds may include The Laddered T-Bill ETF, which the Board
of Trustees of the Fund has determined to be within the same group of investment
companies as the Fund.
The
terms “daily,” “day,” and “trading day,” refer to the period from the close
of the markets on one trading day to the close of the markets on the next
trading day. The Fund is “non-diversified,” under the Investment Company Act of
1940, as amended. Additionally, the Fund’s investment objective is not a
fundamental policy and may be changed by the Fund’s Board of Trustees without
shareholder approval.
The
Roundhill
Memory ETF
is an ETF managed by Roundhill Financial Inc. The Roundhill
Memory ETF
seeks to invest primarily in the equity securities of “Memory Companies,” which
generally include companies involved in the development, manufacture, or supply
of semiconductor memory and storage technologies, such as DRAM, NAND flash
memory, and high-bandwidth memory (“HBM”). The Fund seeks to provide exposure to
companies that may benefit from growing demand for memory and storage solutions
driven by artificial intelligence (“AI”), cloud computing, data centers, and
other data-intensive technologies. In addition to direct investments in equity
securities, the Fund may also seek exposure to Memory Companies through
derivative instruments, such as swap agreements and forward contracts. The
Roundhill
Memory ETF
is listed on the Cboe BZX Exchange, Inc. Roundhill
Memory ETF
is registered as an investment company under the Investment Company Act of 1940
and its shares are registered under the Securities Act of 1933. Information
provided to or filed with the SEC by Roundhill
Memory ETF
pursuant to the Securities Act of 1933 can be located by reference to the SEC
file number 333-273052, and information provided to or filed with the SEC
pursuant to the Investment Company Act of 1940 can be located by reference to
SEC file number 811-23887, in each case through the SEC’s website at
www.sec.gov. In addition, information regarding Roundhill
Memory ETF
may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated
documents.
The
Fund has derived all disclosures contained in this document regarding
Roundhill Memory ETF from the publicly available documents described above.
Neither the Fund, the Trust, the Adviser nor any affiliate has participated in
the preparation of such documents. Neither the Fund, the Trust, the Adviser nor
any affiliate makes any representation that such publicly available documents or
any other publicly available information regarding Roundhill Memory ETF is
accurate or complete. Furthermore, the Fund cannot give any assurance that all
events occurring prior to the date of the prospectus (including events that
would affect the accuracy or completeness of the publicly available documents
described above) that would affect the trading price of DRAM have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of, or
failure to disclose, material future events concerning Roundhill Memory ETF
could affect the value of the Fund’s investments with respect to DRAM and
therefore the value of the Fund.
Because
of daily rebalancing and the compounding of each day’s return over time,
the return of the Fund for periods longer than a single day will be the result
of each day’s returns compounded over the period, which will very likely differ
from -200% of the return of the underlying security over the same period. The
Fund will lose money if the underlying security performance is flat over time,
and as a result of daily rebalancing, the underlying security’s volatility and
the effects of compounding, it is even possible that the Fund will lose money
over time while the underlying security’s performance decreases over a period
longer than a single day.
The
Fund may enter into swap agreements with a limited number of
counterparties. If the underlying security has a dramatic move in price that
causes a material decline in the Fund’s NAV over certain stated periods agreed
to by the Fund and the counterparty, the terms of a swap agreement between a
Fund and its counterparty may permit the counterparty to immediately close out
all swap transactions with the Fund. There is a risk that no suitable
counterparties will be willing to enter into, or continue to enter into,
transactions with the Fund and, as a result, the Fund may not be able to achieve
its leveraged investment objective or may decide to change its leveraged
investment objective.
Principal
Risks
An
investment in the Fund entails risk. The Fund may not achieve its inverse
investment objective and there is a risk that you could lose all of your money
invested in the Fund. The Fund is not a complete investment program.
In addition, the Fund presents risks not traditionally associated with
other mutual funds and ETFs. It is important that investors closely review all
of the risks listed below and understand them before making an investment
in the Fund. The
realization of certain of the risks described below that may result in adverse
market movements may actually benefit the Fund due to its inverse investment
objective.
Effects
of Compounding and Market Volatility Risk. The
Fund has a daily investment objective and the Fund’s performance for periods
greater than a trading day will be the result of each day's returns compounded
over the period, which is very likely to differ from -200% of DRAM’s
performance, before fees and expenses. Compounding affects all investments, but
has a more significant impact on funds that are inverse and that rebalance daily
and becomes more pronounced as volatility and holding periods increase. The
impact of compounding will impact each shareholder differently depending on the
period of time an investment in the Fund is held and the volatility of DRAM
during the shareholder’s holding period of an investment in the
Fund.
The
chart below provides examples of how DRAM volatility and its return could
affect the Fund’s performance. Fund performance for periods greater than one
single day can be estimated given any set of assumptions for the following
factors: a) DRAM volatility; b) DRAM performance; c) period of time; d)
financing rates associated with inverse exposure; e) other Fund expenses; and f)
dividends or interest paid with respect DRAM. The chart below illustrates the
impact of two principal factors – volatility and performance – on Fund
performance. The chart shows estimated Fund returns for a number of combinations
of DRAM volatility and DRAM performance over a one-year period. Performance
shown in the chart assumes that: (i) no dividends were paid with respect DRAM;
(ii) there were no Fund expenses; and (iii) borrowing/lending rates (to obtain
inverse exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates
were reflected, the estimated returns would be different than those shown.
Particularly during periods of higher volatility, compounding will cause results
for periods longer than a trading day to vary from -200% of the performance of
DRAM.
During
periods of higher DRAM volatility, the volatility of DRAM may affect the Fund’s
return as much as, or more than, the return of DRAM. The impact of compounding
will impact each shareholder differently depending on the period of time an
investment in the Fund is held and the volatility of DRAM during a shareholder’s
holding period of an investment in the Fund.
As
shown in the chart below, the Fund would be expected to lose 17.1% if DRAM
provided no return over a one-year period during which DRAM experienced
annualized volatility of 25%. At higher ranges of volatility, there is a chance
of a significant loss of value in the Fund, even if DRAM’s return is
flat. For
instance, if DRAM’s annualized volatility is 100%,
the
Fund would be expected to lose 95% of its value, even if the cumulative return
for the year was 0%. Areas
shaded red (or dark gray) represent those scenarios where the Fund can be
expected to return less than -200% of the performance of DRAM and those shaded
green (or light gray) represent those scenarios where the Fund can be expected
to return more than -200% of the performance of DRAM. The table below is not a
representation of the Fund’s actual returns, which may be significantly better
or worse than the returns shown below as a result of any of the factors
discussed above or in “Daily Inverse Correlation Risk” below.
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One
Year |
-200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
120% |
506.5% |
418.1% |
195.2% |
15.6% |
-68.9% |
| -50% |
100% |
288.2% |
231.6% |
88.9% |
-26.0% |
-80.1% |
| -40% |
80% |
169.6% |
130.3% |
31.2% |
-48.6% |
-86.2% |
| -30% |
60% |
98.1% |
69.2% |
-3.6% |
-62.2% |
-89.8% |
| -20% |
40% |
51.6% |
29.5% |
-26.2% |
-71.1% |
-92.2% |
| -10% |
20% |
19.8% |
2.3% |
-41.7% |
-77.2% |
-93.9% |
| 0% |
0% |
-3.0% |
-17.1% |
-52.8% |
-81.5% |
-95.0% |
| 10% |
-20% |
-19.8% |
-31.5% |
-61.0% |
-84.7% |
-95.9% |
| 20% |
-40% |
-32.6% |
-42.4% |
-67.2% |
-87.2% |
-96.5% |
| 30% |
-60% |
-42.6% |
-50.9% |
-72.0% |
-89.1% |
-97.1% |
| 40% |
-80% |
-50.5% |
-57.7% |
-75.9% |
-90.6% |
-97.5% |
| 50% |
-100% |
-56.9% |
-63.2% |
-79.0% |
-91.8% |
-97.8% |
| 60% |
-120% |
-62.1% |
-67.6% |
-81.5% |
-92.8% |
-98.1% |
DRAM
is newly launched and began trading in calendar year 2026. As of the date of
this prospectus, DRAM does not have a track record of historical performance or
daily volatility. Accordingly, no annualized performance or volatility data is
available for prior years.
For
information regarding the effects of volatility and performance on the
long-term performance of the Fund, see “Additional Information Regarding
Investment Techniques and Policies”, and "Leverage " in the Fund’s Statement of
Additional Information.
Derivatives
Risk. Derivatives
are financial instruments that derive value from the underlying reference
asset or assets, such as stocks, bonds, or funds (including ETFs), interest
rates or indexes. Investing in derivatives may be considered aggressive and may
expose the Fund to greater risks, and may result in larger losses or small
gains, than investing directly in the reference assets underlying those
derivatives, which may prevent the Fund from achieving its investment
objective.
The
Fund expects to use swap agreements to achieve its investment objective.
The Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other
investments, including risk related to the market, leverage, imperfect
correlations with underlying investments or the Fund’s other portfolio holdings,
higher price volatility, lack of availability, counterparty, liquidity,
valuation, and legal restrictions. The performance of a derivative may not track
the performance of its reference asset, including due to fees and other costs
associated with it. Because derivatives often require only a limited initial
investment, the use of derivatives may expose the Fund to losses in excess of
the amount initially invested. As a result, the value of an investment in the
Fund may change quickly and without warning. Additionally, any financing,
borrowing or other costs
associated
with using derivatives may also have the effect of lowering the Fund’s return.
Such costs may increase as interest rates rise.
Swap
Agreements.
Swap agreements are entered into with financial institutions for a specified
period which may range from one day to more than one year. In a standard swap
transaction, two parties agree to exchange the return (or differentials in rates
of return) earned or realized on particular predetermined reference or
underlying securities or instruments. The gross return to be exchanged or
swapped between the parties is calculated based on a notional amount or the
return on or change in value of a particular dollar amount invested in a
reference asset. Swap agreements are generally traded over-the-counter, and
therefore, may not receive as much regulatory protection, which may expose
investors to significant losses.
The
Fund will be subject to regulatory constraints relating to the level of
value at risk that the Fund may incur through its derivatives portfolio. To the
extent the Fund exceeds these regulatory thresholds over an extended period, the
Fund may determine that it is necessary to make adjustments to the Fund’s
investment strategy and the Fund may not achieve its investment objective. To
the extent that the Fund exceeds the level of value at risk for an extended
period, the Fund may amend and/or supplement its prospectus as promptly as
feasible under the particular circumstances to include appropriate adjustments
to its investment strategy and if necessary, the Fund’s name.
Put
Options.
The
use of put options involves investment strategies and risks different from those
associated with ordinary portfolio securities transactions. The prices of
options are volatile and are influenced by, among other things, actual and
anticipated changes in the value of the underlying instrument, including the
anticipated volatility, which are affected by fiscal and monetary policies and
by national and international politics, changes in the actual or implied
volatility or the reference asset, the time remaining until the expiration of
the option contract and economic events. The values of the options contracts in
which the Fund invests are substantially influenced by the value of the
underlying instrument. The Fund may experience substantial downside from
specific option positions and certain option positions held by the Fund may
expire worthless. The options held by the Fund are exercisable at the strike
price on their expiration date. As an option approaches its expiration date, its
value typically increasingly moves with the value of the underlying instrument.
However, prior to expiry, the value of an option generally does not increase or
decrease at the same rate as the underlying instrument. There may at times be an
imperfect correlation between the movement in values options contracts and the
reference asset, and there may at times not be a liquid secondary market for
certain options contracts. The value of the options held by the Fund will be
determined based on market quotations or other recognized pricing methods. As
the options contracts are exercised or expire the Fund may enter into new
options contracts, a practice referred to as rolling.
FLEX
Options. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
reference asset. Factors that may influence the value of the FLEX Options, other
than gains or losses in the reference asset, may include interest rate changes,
changing supply and demand, decreased liquidity of the FLEX Options, and
changing volatility levels of the reference asset. FLEX Options are listed on an
exchange; however, it is not guaranteed that a liquid secondary trading market
will exist. In the event that trading in the FLEX Options is limited or absent,
the value of the FLEX Options may decrease.
Counterparty
Risk. A
counterparty may be unwilling or unable to make timely payments to meet its
contractual obligations or may fail to return holdings that are subject to the
agreement with the counterparty. If the counterparty or its affiliate becomes
insolvent, bankrupt or defaults on its payment obligations to the Fund, the
value of an investment held by the Fund may decline. Additionally, if any
collateral posted by the counterparty for the benefit of the Fund is
insufficient or there are delays in the Fund’s ability to access such
collateral, the Fund may not be able to achieve its inverse investment
objective.
In
addition, the Fund may enter into swap agreements with a limited number of
counterparties, which may increase the Fund’s exposure to counterparty credit
risk. Further, there is a risk that no suitable counterparties will be willing
to enter into, or continue to enter into, transactions with the Fund and, as a
result, the Fund may not be able to achieve its inverse investment objective or
may decide to change its inverse investment objective. The risk of a limited
number of counterparties may be, and historically has been, particularly
accentuated during times of significant market volatility. During times of
significant market volatility, the costs to enter into the swaps that the Fund
utilizes may increase significantly, which may negatively impact the Fund’s
returns. While the objective of the Fund is to seek daily investment results,
before
fees and expenses,
of -200% of the daily performance of DRAM, it is important for investors to
understand that significant increases in the costs of entering into the swaps
may negatively impact investment results after
fees and expenses.
Rebalancing
Risk. If
for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective. In these instances, the Fund may have investment exposure to DRAM
that is significantly greater or significantly less than its stated multiple.
The Fund may be more exposed to leverage risk than if it had been properly
rebalanced and may not achieve its investment objective, leading to
significantly greater losses or reduced gains.
Shorting
Risk.
A short position is a financial transaction in which an investor sells an
asset that the investor does not own. In such a transaction, an investor’s short
position appreciates when a reference asset falls in value. By contrast, the
short position loses value when the reference asset’s value increases. Because
historically most assets have risen in value over the long term, short positions
are expected to depreciate in value. Accordingly, short positions may be riskier
and more speculative than traditional investments. In addition, any income,
dividends, or payments by reference assets in which the Fund has a short
position will impose expenses on the Fund that reduce returns.
The
Fund will obtain short exposure through the use of swap agreements,
purchased put options, and physical short sales of DRAM. To the extent that the
Fund obtains short exposure from derivatives, the Fund may be exposed to
heightened volatility or limited liquidity related to the reference asset of the
underlying short position, which will adversely impact the Fund’s ability
to meet its investment objective or adversely impact its performance. If the
Fund were to experience this volatility or decreased liquidity, the Fund may be
required to obtain short exposure through alternative investment strategies that
may be less desirable or more costly to implement. If the reference asset
underlying the short position is thinly traded or has a limited market, there
may be a lack of available securities or counterparties for the Fund to enter
into a short position or obtain short exposure from a derivative. To the extent
the Fund engages in physical short sales, the Fund is subject to the risk that
the price of the security will increase between the date of the short sale and
the date on which the Fund replaces the security, the Fund will experience a
loss, which is theoretically unlimited. In addition, physical short sales do not
provide -200% exposure to DRAM and, as a result, if the Fund engages in physical
short sales to a greater extent, the Fund may not achieve its -200% daily
investment objective.
Cash
Transaction Risk.
Unlike most ETFs, the Fund currently intends to effect creations and redemptions
principally for cash, rather than principally for in-kind securities, because of
the nature of the financial instruments held by the Fund. As a result, the Fund
is not expected to be tax efficient and will incur brokerage costs related to
buying and selling securities to achieve its investment objective thus incurring
additional expenses than other funds that primarily effect creations and
redemptions in kind. To the extent that such costs are not offset by transaction
fees paid by an authorized participant, the Fund may bear such costs, which will
decrease the Fund’s net asset value.
Intra-Day
Investment Risk.
The Fund seeks investment results from the close of the market on a given
trading day until the close of the market on the subsequent trading day. The
exact exposure of an investment in the Fund intraday in the secondary market is
a function of the difference between the value of DRAM at the market close on
the first trading day and the value of DRAM at the time of purchase. If DRAM
loses value, the Fund’s net assets will rise by the same amount as the Fund’s
exposure. Conversely, if DRAM rises, the Fund’s net assets will decline by the
same amount as the Fund’s exposure. Thus, an investor that purchases shares
intra-day may experience performance that is greater than, or less than, the
Fund’s stated multiple of DRAM.
If
there is a significant intra-day market event and/or DRAM experiences a
significant change in value, the Fund may not meet its investment objective, may
not be able to rebalance its portfolio appropriately, or may experience
significant premiums or discounts, or widened bid-ask spreads. Additionally, the
Fund may close prior to the close of trading on the Exchange and experience
significant losses.
Daily
Inverse Correlation Risk.
There is no guarantee that the Fund will achieve a high degree of inverse
correlation to DRAM and therefore achieve its daily inverse investment
objective. The Fund’s exposure to DRAM is impacted by DRAM’s movement. Because
of this, it is unlikely that the Fund will be perfectly exposed to DRAM at the
end of each day. The possibility of the Fund being materially over- or
under-exposed to DRAM increases on days when DRAM is volatile near the close of
the trading day. Market disruptions, regulatory restrictions and high volatility
will also adversely affect the Fund’s ability to adjust exposure to the required
levels.
The
Fund may have difficulty achieving its daily inverse investment objective
for many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, accounting standards and their application to
income items, disruptions, illiquid or high volatility in the markets for the
securities or financial instruments in which the Fund invests, early and
unanticipated closings of the markets on which the holdings of the Fund trade,
resulting in the inability of the Fund to execute intended portfolio
transactions, regulatory and tax considerations, which may cause the Fund to
hold (or not to hold) DRAM. The Fund may take or refrain from taking positions
in order to improve tax efficiency, comply with regulatory restrictions, or for
other reasons, each of which may negatively affect the Fund’s desired inverse
correlation with DRAM. The Fund may be subject to large movements of assets into
and out of the Fund, potentially resulting in the Fund being over- or
under-exposed to DRAM. Additionally, the Fund’s underlying investments and/or
reference assets may trade on markets that may not be open on the same day as
the Fund, which may cause a difference between the changes in the daily
performance of the Fund and changes in the performance of DRAM. Any of these
factors could decrease the inverse correlation between the performance of the
Fund and DRAM and may hinder the Fund’s ability to meet its daily inverse
investment objective on or around that day.
Market
Risk. The
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. The Fund is subject
to the risk that geopolitical events will disrupt markets and adversely affect
global economies, markets, and exchanges. Local, regional, or global events such
as war, acts of terrorism, natural disasters, the spread of infectious illness
or other public health issues, conflicts and social unrest or other events could
have a significant impact on the Fund, its investments, and the Fund’s ability
to achieve its investment objective.
Indirect
Investment Risk. Roundhill
Memory ETF is not affiliated with the Trust, the Adviser, or any affiliates
thereof and is not involved with this offering in any way, and has no obligation
to consider the Fund in taking any corporate actions that might affect the value
of the Fund. The Trust, the Fund and any affiliate are not responsible for the
performance of Roundhill Memory ETF and make no representation as to the
performance of DRAM. Investing in the Fund is not equivalent to investing in
DRAM. Fund shareholders will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to
DRAM.
Underlying
Security Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole.
Regulatory
Risk. The
Fund is subject to the risk that a change in U.S. law and related regulations
will impact the way a Fund operates, increase the particular costs of the Fund's
operations and/or change the competitive landscape. Additional legislative or
regulatory changes could occur that may materially and adversely affect the
Fund.
DRAM
Investing Risk. In
addition to the risks associated generally with investments in equity
securities, investments in companies involved in DRAM and other semiconductor
memory products are subject to risks associated with the semiconductor and
memory industry, including cyclicality in demand, pricing pressure for memory
products, supply chain disruptions, rapid technological change, and intense
competition.
Other
Investment Companies Risk. To
the extent that the Fund invests in other ETFs or investment companies, the
value of an investment in the Fund is based on the performance of the underlying
funds in which the Fund invests and the allocation of its assets among those
ETFs or investment companies. The underlying ETFs and investment companies may
change their investment goals, policies or practices and there can be no
assurance that the underlying ETFs or investment companies will achieve their
respective investment goals. Because the Fund invests in ETFs and other
investment companies, shareholders indirectly bear a proportionate share of the
expenses charged by the underlying funds in which it invests which impacts the
Fund’s performance. The principal risks of an investment in the Fund include the
principal risks of investing in the underlying ETFs and investment
companies.
The
Fund is exposed to the risks of the underlying ETFs and investment companies in
which it invests in direct proportion to the amount of assets the Fund allocates
to each underlying fund. One underlying fund may buy the same security that
another underlying fund is selling. You would indirectly bear the costs of both
trades. In addition, you may receive taxable gains from portfolio transactions
by the underlying funds, as well as taxable gains from the Fund’s transactions
in shares of the underlying funds. The Fund’s ability to achieve its investment
goal depends, in part, upon the Adviser’s skill in selecting an optimal mix of
underlying funds.
Concentration
Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries, which will subject the Fund to the risk that economic,
political or other conditions that have a negative effect on those sectors
and/or industries may negatively impact the Fund to a greater extent than if the
Fund’s assets were invested in a wider variety of sectors or industries.
Money
Market Instrument Risk. The
Fund may use a variety of money market instruments for cash management
purposes, including money market funds, depositary accounts and repurchase
agreements. Money market funds may be subject to credit risk with respect to the
debt instruments in which they invest. Depository accounts may be subject to
credit risk with respect to the financial institution in which the depository
account is held. Repurchase agreements may be subject to market and credit risk
related to the collateral securing the repurchase agreement. Money market
instruments may lose money.
Liquidity
Risk. Holdings
of the Fund may be difficult to buy or sell or may be illiquid,
particularly during times of market turmoil. Illiquid securities may be
difficult to value, especially in changing or volatile markets. If the Fund is
forced to buy or sell an illiquid security or derivative instrument at an
unfavorable time or price, the Fund may be adversely impacted. Certain market
conditions or restrictions may prevent the Fund from limiting losses, realizing
gains, or achieving a high correlation with DRAM. There is no assurance that a
security or derivative instrument that is deemed liquid when purchased will
continue to be liquid. Market illiquidity may cause losses for the Fund. To the
extent that DRAM value increases or decreases significantly, the Fund may be one
of many market participants that are attempting to transact in DRAM. Under such
circumstances, the market for DRAM may lack sufficient liquidity for all market
participants’ trades. Therefore, the Fund may have more difficulty transacting
in the securities or financial instruments and the Fund’s transactions could
exacerbate the price changes of DRAM and may impact the ability of the Fund to
achieve its investment objective.
In
certain cases, the market for certain securities in DRAM and/or Fund may
lack sufficient liquidity for all market participants’ trades. Therefore, the
Fund may have difficulty transacting in it and/or in correlated investments,
such as swap contracts. Further, the Fund’s transactions could exacerbate
illiquidity and volatility in the price of DRAM and correlated derivative
instruments.
Early
Close/Trading Halt Risk. Although
an underlying security’s shares are listed for trading on an exchange,
there can be no assurance that an active trading market for such shares will be
available at all times. An exchange or market may close or issue trading halts
on specific securities or financial instruments, including the shares of the
Fund. Under such circumstances, the ability to buy or sell certain portfolio
securities or financial instruments may be restricted, which may result in
the Fund being unable to buy or sell investments for its portfolio, may disrupt
the Fund’s creation/redemption process, and may temporarily prevent investors
from buying and selling shares of the Fund. In addition, the Fund may be unable
to accurately price its investments, may fail to achieve performance that is
correlated with DRAM and may incur substantial losses. If there is a significant
intra-day market event and/or the securities of the underlying security
experience a significant increase or decrease, the Fund may not meet its
investment objective or rebalance its portfolio appropriately. Additionally, the
Fund may close to purchases and sales of Shares prior to the close of regular
trading on the exchange and incur significant losses.
Equity
Securities Risk. Publicly
issued equity securities, including common stocks, are subject to market risks
that may cause their prices to fluctuate over time. Fluctuations in the value of
equity securities in which the Fund invests, and/or has exposure to, will cause
the net asset value of the Fund to fluctuate. To the extent that the Fund
engages in short sales of the shares of DRAM, such short sales do not provide
leveraged exposure to DRAM and, as a result, the Fund may not achieve its -200%
daily investment objective.
Cash
Transaction Risk.
The Fund intends to effect creations and redemptions for cash rather than for
in-kind securities. As a result, the Fund may not be tax efficient and may incur
brokerage costs related to buying and selling securities to achieve its
investment objective thus incurring additional expenses than if it had effected
creations and redemptions in kind. To the extent that such costs are not offset
by transaction fees paid by an authorized participant, the Fund may bear such
costs, which will decrease the Fund’s net asset value.
Tax
Risk. In
order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying income,” meet
certain asset diversification tests at the end of each taxable quarter, and meet
annual distribution requirements. The Fund’s pursuit of its investment strategy
will potentially be limited by the Fund’s intention to qualify for such
treatment and could adversely affect the Fund’s ability to so qualify. The Fund
may make certain investments, the treatment of which for these purposes is
unclear. If, in any year, the Fund were to fail to qualify for the special tax
treatment accorded a RIC and its shareholders, and were ineligible to or were
not to cure such failure, the Fund would be taxed in the same manner as an
ordinary corporation subject to U.S. federal income tax on all its income at the
fund level. The resulting taxes could substantially reduce the Fund’s net assets
and the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions. Please see the section entitled “Taxes” in the Statement of
Additional Information for more information.
Non-Diversification
Risk. The
Fund is classified as “non-diversified” under the Investment Company Act of
1940, as amended. This means it has the ability to invest a relatively high
percentage of its assets in the securities of a small number of issuers or in
financial instruments with a single counterparty or a few counterparties. This
may increase the Fund’s volatility and increase the risk that the Fund’s
performance will decline based on the performance of a single issuer or the
credit of a single counterparty and make the Fund more susceptible to risks
associated with a single economic, political, or regulatory occurrence than a
diversified fund.
ETF
Risks.
The Fund is an exchange-traded fund, and, as a result of an ETF’s structure, it
is exposed to the following risks:
•Authorized
Participants, Market Makers, and Liquidity Providers Limitation Risk.
The Fund has a limited number of financial institutions that may act as
Authorized Participants (“APs”). In addition, there may be a limited number of
market makers and/or liquidity providers in the marketplace. To the extent
either of the following events occur, Shares may trade at a material discount to
NAV and possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to
perform
these services, or (ii) market makers and/or liquidity providers exit the
business or significantly reduce their business activities and no other entities
step forward to perform their functions.
•Cash
Redemption Risk.
The Fund intends to redeem Shares for cash or to otherwise include cash as part
of its redemption proceeds. The Fund may be required to sell or unwind portfolio
investments to obtain the cash needed to distribute redemption proceeds. This
may cause the Fund to recognize a capital gain that it might not have recognized
if it had made a redemption in-kind. As a result, the Fund may pay out higher
annual capital gain distributions than if the in-kind redemption process was
used.
•Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
•Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility and volatility
in the Fund’s portfolio holdings, periods of steep market declines, and periods
when there is limited trading activity for Shares in the secondary market, in
which case such premiums or discounts may be significant. If an investor
purchases Shares at a time when the market price is at a premium to the NAV of
the Shares or sells at a time when the market price is at a discount to the NAV
of the Shares, then the investor may sustain losses that are in addition to any
losses caused by a decrease in NAV.
•Trading.
Although Shares are listed for trading on a national securities exchange, and
may be traded on other U.S. exchanges, there can be no assurance that Shares
will trade with any volume, or at all, on any stock exchange. In stressed market
conditions, the liquidity of Shares may begin to mirror the liquidity of the
Fund’s underlying portfolio holdings, which can be significantly less liquid
than Fund Shares.
New
Fund Risk. As
of the date of this prospectus, the Fund has no operating history and currently
has fewer assets than larger funds. Like other new funds, large inflows and
outflows may impact the Fund’s market exposure for limited periods of time. This
impact may be positive or negative, depending on the direction of market
movement during the period affected.
The
Shares will change in value, and you could lose money by investing in the Fund.
The Fund may not achieve its investment objective.
Performance
History
The
Fund has not yet commenced operations and does not have a full calendar year of
performance history. In the future, performance information will be presented in
this section of the Prospectus. Performance information will contain a bar chart
and table that provide some indication of the risks of investing in the Fund by
showing changes in the Fund’s performance from year to year and by showing the
Fund’s average annual returns for certain time periods as compared to a broad
measure of market performance. Investors should be aware that past performance
before and after taxes is not necessarily an indication of how the Fund will
perform in the future.
Updated
performance information for the Fund, including its current net asset value per
share, is available by calling toll-free at (833) 759-6110.
Investment
Adviser
Tuttle
Capital Management, LLC (the “Adviser”) is the investment adviser to the
Fund.
Portfolio
Manager
Matthew
Tuttle, Chief Executive Officer of the Adviser, has served as the Fund’s
portfolio manager since its inception.
Purchase
and Sale of Fund Shares
The
Fund will issue (or redeem) shares to certain institutional investors (typically
market makers or other broker-dealers) only in large blocks of at least XX,XXX
shares known as “Creation Units.” Creation Unit transactions are typically
effected in cash, but the Fund reserves the right to accept in-kind securities.
Individual shares may only be purchased and sold on a national securities
exchange through a broker-dealer. You can purchase and sell individual shares of
the Fund throughout the trading day like any publicly traded security. The
Fund’s shares are listed on the Exchange (i.e.,
[_____]). The price of the Fund’s shares is based on market price, and because
exchange-traded fund shares trade at market prices rather than NAV, shares may
trade at a price greater than NAV (premium) or less than NAV (discount). When
buying or selling shares through a broker, most investors will incur customary
brokerage commissions and charges and you may pay some or all of the spread
between the bid and the offered prices in the secondary market for shares.
Except when aggregated in Creation Units, the Fund’s shares are not redeemable
securities. Recent information regarding the Fund, including its NAV, market
price, premiums and discounts, and bid/ask spreads, is available on the Fund’s
website at www.rexshares.com.
Tax
Information
The
Fund’s distributions will be taxed as ordinary income or capital gain, unless
you are investing through a tax-deferred arrangement, such as a 401(k) plan or
an individual retirement account, in which case withdrawals from such
arrangements generally will be taxed.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (e.g.,
a bank), the Fund and its related companies may pay the intermediary for the
sale of Fund shares and related services. These payments may create a conflict
of interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND’S INVESTMENTS
The
Fund’s investment objective is described in the summary section for the Fund.
The summary section also describes the Fund’s principal investment strategies,
including the types of securities in which the Fund invests, and the principal
risks of investing in the Fund. The principal investment strategies are not the
only investment strategies available to the Fund, but they are the ones the Fund
primarily uses to achieve its investment objective.
The
Fund does not seek to achieve its stated investment objective for a period of
time different than a trading day. The Fund’s investment objectives may be
changed by the Board of Trustees (the “Board”) of ETF Opportunities Trust (the
“Trust”) without shareholder approval upon sixty (60) days’ written notice to
shareholders. Unless otherwise noted, all other policies of the Fund may be
changed without shareholder approval. The Fund reserves the right to substitute
a different ETF, index, or security for the underlying ETF.
T-REX
2X Inverse DRAM Daily Target ETF
(a
“2X Inverse ETF”).
The
Fund is not suitable for all investors. The Fund is designed to be utilized only
by sophisticated investors, such as traders and active investors employing
dynamic strategies. Such investors are expected to monitor and manage their
portfolios frequently. Investors in the Fund should: (a) understand the risks
associated with the use of leverage; (b) understand the consequences of seeking
daily leveraged investment results; and (c) intend to actively monitor and
manage their investments. Investors who do not understand the Fund or do not
intend to actively manage their funds and monitor their investments should not
buy the Fund.
There
is no assurance that the Fund will achieve its investment objective and an
investment in the Fund could lose money. No single Fund is a complete
investment program.
ETFs
are funds that trade like other publicly traded securities. Unlike shares of a
mutual fund, which can be bought and redeemed from the issuing fund by all
shareholders at a price based on NAV, shares of the Fund may be purchased or
redeemed directly from the Fund at NAV solely by Authorized Participants and
only in aggregations of a specified number of shares Creation Units. Also,
unlike shares of a mutual fund, shares of the Fund are listed on a national
securities exchange and trade in the secondary market at market prices that
change throughout the day.
The
Fund will enter into swap agreements with respect to its underlying security
with financial institutions for a specified period ranging from one day to more
than one year whereby the Fund and the financial institution will agree to
exchange the return earned or realized on the underlying security. The gross
returns to be exchanged or “swapped” between the parties is calculated with
respect to a “notional amount,” e.g., the return on or change in value of a
particular dollar amount representing the underlying security.
Each
trading day the Adviser adjusts each 2X Inverse ETF’s exposure to its underlying
security such that the notional exposure of all swaps equals -200% of the ETF’s
aggregate net asset value. The impact of market movements during the day
determines whether the total notional swap exposure needs to be increased or
decreased. If the price of the underlying security has fallen on a given day,
the value of the Fund’s net assets should rise, meaning its total notional swap
exposure will typically need to be increased. Conversely, if the price of the
underlying security has risen on a given day, the value of the Fund’s net assets
should fall, meaning its total notional swap exposure will typically need to be
reduced.
The
time and manner in which the Fund rebalances its portfolio may vary from day to
day at the sole discretion of the Adviser depending upon market conditions and
other circumstances. Generally, at or near the close of the market at each
trading day, the Fund will position its portfolio to ensure that the Fund’s
exposure to its underlying security is consistent with its stated investment
objective. The Fund reviews its notional exposure under each of its swap
agreements, which reflects the extent of the Fund’s total investment exposure
under the swap, to ensure that the Fund’s exposure is in-line with its stated
investment objective. The gross returns to be exchanged are calculated with
respect to the notional amount and the underlying security’s returns to which
the swap is linked. Swaps are typically closed out on a net basis. Thus, while
the notional amount reflects the Fund’s total investment exposure under the
swap,
the net amount is the Fund’s current obligations (or rights) under the swap.
That is the amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement. If for any
reason the Fund is unable to rebalance all or a portion of its portfolio, or if
all or a portion of the portfolio is rebalanced incorrectly, the Fund’s
investment exposure may not be consistent with the Fund’s investment objective.
As a result, the Fund may be more or less exposed to leverage risk than if it
had been properly rebalanced and may not achieve its investment objective. To
the extent that the Fund needs to “roll” its swap positions (i.e., enter into
new swap positions with a later expiration date as the current positions
approach expiration), it could be subjected to increased costs, which could
negatively impact the Fund’s performance.
To
create the necessary exposure, each 2X Inverse ETF will enter into one or more
swap agreements, which incur borrowing costs. In light of these charges and the
Fund’s operating expenses, the expected return of a 2X Inverse ETF over one
trading day is equal to the gross expected return, which is negative two times
the daily underlying security's return, minus (i) financing charges incurred by
the Fund, including the financing cost embedded in the underlying security, and
(ii) daily operating expenses. For instance, if an underlying security returns
1% on a given day, the gross expected return of the Fund would be -1% multiplied
by the daily leverage factor, but the net expected return, which factors in the
cost of financing the portfolio and the impact of operating expenses, would be
lower.
The
Fund may invest in other exchange-traded funds for cash management purposes.
Such exchange-traded funds may include The Laddered T-Bill ETF, which the Board
of Trustees of the Fund has determined to be within the same group of investment
companies as the Fund.
Additionally,
the Fund may invest between 40-80% of the Fund’s portfolio depending on the
amount of collateral required by the Fund’s counterparties in (1) U.S.
Government securities, such as bills, notes and bonds issued by the U.S.
Treasury; (2) money market funds; (3) short term bond ETFs and/or (4) corporate
debt securities, such as commercial paper and other short-term unsecured
promissory notes issued by businesses that are rated investment grade or of
comparable quality.
NEITHER
THE FUND, ETF OPPORTUNITIES TRUST, AND TUTTLE CAPITAL MANAGEMENT, LLC ARE
AFFILIATED WITH ROUNDHILL MEMORY ETF, OR REX SHARES, LLC.
Swap
Agreements
The
Fund will enter into swap agreements to pursue its investment objective of
delivering daily investment results, before fees and expenses, of -200% of the
daily performance of its underlying security. The swap agreements may include as
a reference asset investment vehicle that seek exposure to the underlying
security.
Swap
agreements are contracts entered into with financial institutions for a
specified period ranging from a day to more than one year. In a standard “swap”
transaction, two parties agree to exchange the return (or differentials in rates
of return) earned or realized on particular predetermined investments or
instruments. The gross return to be exchanged or “swapped” between the parties
is calculated with respect to a “notional amount,” e.g., the return on or change
in value of a particular dollar amount representing the underlying security. The
Fund may use a combination of swaps on the underlying security and swaps on
various investment vehicles that are designed to track the performance of the
underlying security. The underlying investment vehicle may not track the
performance of the underlying security due to embedded costs and other factors,
which may increase the Fund’s correlation risk and impact the Fund’s ability to
correlate with the underlying security.
With
respect to the use of swap agreements, if the underlying security has a dramatic
move in price that causes a material decline in the Fund’s NAV over certain
stated periods agreed to by the Fund and the counterparty, the terms of a swap
agreement between the Fund and its counterparty may permit the counterparty to
immediately close out all swap transactions with the Fund. In that event, a Fund
may be unable to enter into another swap agreement or invest in other
derivatives to achieve the desired exposure consistent with its investment
objective. This, in turn, may prevent the Fund from achieving its investment
objective, even if the underlying security reverses all or a portion of its
price movement. Any costs associated with using swap agreements may also have
the effect of lowering the Fund’s return.
The
Fund may also invest in U.S. Government Securities, money market funds and
corporate debt securities such as commercial paper or other short-term unsecured
promissory notes issued by businesses that are rated investment grade or of
comparable quality. The Fund may also invest in short-term bond
ETFs.
U.S.
government securities include U.S. Treasury obligations and securities issued or
guaranteed by various agencies of the U.S. government, or by various
instrumentalities that have been established or sponsored by the U.S.
government. U.S. Treasury obligations are backed by the “full faith and credit”
of the U.S. government. Securities issued or guaranteed by federal agencies and
U.S. government sponsored instrumentalities may or may not be backed by the full
faith and credit of the U.S. government.
Non-Principal
Investments
Cash
Equivalents and Short-Term Investments
The
Fund may invest in securities with maturities of less than one year or cash
equivalents, or they may hold cash. The percentage of the Fund invested in such
holdings varies and depends on several factors, including market conditions. For
more information on eligible short-term investments, see the SAI.
Synthetic
Exposure
The
Fund may seek to replicate the short exposure to the underlying security by
creating a synthetic short position. To establish a synthetic short position, a
2X Inverse ETF purchases a put option on the underlying security and sells a
call option on the underlying security at the same strike price and expiration
date. This effectively results in similar risk exposures as would be the case if
the Fund held (or entered into a short position on) the underlying security. The
Fund may also vary the combination of puts and calls, strike prices, and
expiration dates to target -200% investment exposure.
Additional
Information Regarding Investment Techniques and Policies
The
Effects of Fees and Expenses on the Return of a Fund for a Single Trading Day.
To
create the necessary exposure, each 2X Inverse ETF uses leveraged investment
techniques, including total return swap agreements, which incur brokerage and
financing charges. In light of these charges and the Fund’s operating expenses,
the expected return of a Fund over one trading day is equal to the gross
expected return, which is negative two times the daily return of the underlying
security, minus (i) financing charges incurred by the portfolio and (ii) daily
operating expenses. For instance, if the underlying security returns 2% on a
given day, the gross expected return of the Fund would be -4%, but the net
expected return, which factors in the cost of financing the portfolio and the
impact of operating expenses, would be lower.
The
Fund will reposition its portfolio at the end of every trading day. Therefore,
if an investor purchases Fund shares at the close of the markets on a given
trading day, the investor’s exposure to the underlying security would reflect
200% of the inverse performance of the underlying security during the following
trading day, subject to the charges and expenses described above.
A
Cautionary Note to Investors Regarding Dramatic Price Movement in the Underlying
Security.
The Fund could lose an amount greater than its net assets in the event of a
movement of the underlying security in excess of 50% in a direction adverse to
the Fund (meaning an increase in excess of 50% of the value of the underlying
security for a 2X Inverse ETF). The risk of total loss exists.
If
the underlying security has a dramatic adverse move that causes a material
decline in the Fund’s net assets, the terms of a Fund’s swap agreements may
permit the counterparty to immediately close out all swap transactions with the
Fund. In that event, a Fund may be unable to enter into another swap agreement
or invest in other derivatives to achieve exposure consistent with a Fund’s
investment objective. This may prevent a Fund from achieving its leveraged
investment objective, even if the underlying security later reverses all or a
portion the move, and result in significant losses.
Examples
of the Impact of Daily Leverage and Compounding. Because
the Fund’s exposure to the underlying security is repositioned on a daily basis,
for a holding period longer than one day, the pursuit of a daily investment
objective will result in daily leveraged compounding for the Fund. This means
that the return of the underlying security over a period of time greater than
one day multiplied by a Fund’s daily leveraged investment objective (e.g.,
-200%) generally will not equal the Fund’s performance over that same period. As
a consequence, investors should not plan to hold a Fund unmonitored for periods
longer than a single trading day. This deviation increases with higher
volatility in the underlying security and longer holding periods. Further, the
return for investors that invest for periods less than a full trading day or for
a period different than a trading day will not be the product of the return of a
Fund’s stated daily leveraged investment objective and the performance of the
underlying security for the full trading day. The actual exposure will largely
be a function of the performance of the underlying security from the end of the
prior trading day.
Consider
the following examples:
While
these examples are designed to show the effect on the Fund of leverage,
volatility, and performance with respect to the underlying security, these
examples apply to the underlying security.
Mary
is considering investments in two Funds, Funds A and B. Fund A is an ETF which
seeks (before fees and expenses) to match the performance of the underlying
security. Fund B is a leveraged inverse ETF and seeks daily leveraged investment
results (before fees and expenses) that correspond to -200% of the daily
performance of the underlying security.
An
investment in Fund A would be expected to gain 5% on Day 1 and lose 4.76% on Day
2, returning the investment to its original value. The following example assumes
a $100 investment in Fund A when the underlying security is also valued at
$100:
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| Day |
The
Underlying Security Value |
The
Underlying Security Performance |
Value
of Fund A Investment |
|
$100.00 |
|
$100.00 |
| 1 |
$105.00 |
5.00% |
$105.00 |
| 2 |
$100.00 |
-4.76% |
$100.00 |
The
same $100 investment in Fund B would be expected to lose 10% on Day 1 (-200% of
5%) but gain 9.52% on Day (-200% of -4.76%).
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| Day |
The
Underlying Security Performance |
-200%
of the Underlying Security Performance |
Value
of Fund B Investment |
|
|
|
$100.00 |
| 1 |
5.00% |
-10.00% |
$90.00 |
| 2 |
-4.76% |
9.52% |
$98.57 |
Although
the percentage gain in Fund B on Day 2 is smaller than the percentage loss on
Day 1, the gain is applied to a lower principal amount, so the investment in
Fund B experiences a loss even when the aggregate value of the underlying
security for the two-day period has not declined. (These calculations do not
include the charges for fund fees and expenses).
As
you can see, an investment in Fund B has additional risks due to the effects of
leverage, inverse exposure and compounding.
An
investor who purchases shares of the Fund intra-day will generally receive more,
or less, than -200% exposure to the underlying security from that point until
the end of the trading day. The actual exposure will be largely a function of
the performance of the underlying security from the end of the prior trading
day. If the Fund’s shares are held for a period
longer
than a single trading day, the Fund’s performance is likely to deviate from
-200% of the return of the underlying security for the longer period. This
deviation will increase with higher volatility of the underlying security and
longer holding periods.
Examples
of the Impact of Volatility.
The Fund rebalances its portfolio on a daily basis, increasing exposure in
response to that day’s gains or reducing exposure in response to that day’s
losses. Daily rebalancing will typically cause the Fund to lose money if the
underlying security experience volatility. A volatility rate is a statistical
measure of the magnitude of fluctuations in the underlying security’s returns
over a defined period. For periods longer than a trading day, volatility in the
performance of the
underlying
security from day to day is the primary cause of any disparity between the
Fund’s actual returns and the returns of the underlying security for such
period. Volatility causes such disparity because it exacerbates the effects of
compounding on the Fund’s returns. In addition, the effects of volatility are
magnified in the Fund due to leverage. Consider the following three examples
that demonstrate the effect of volatility on a hypothetical fund:
Example
1 – The Underlying Security Experiences Low Volatility
John
invests $10.00 in a 2X Inverse ETF at the close of trading on Day 1. During Day
2, the underlying security gains 2%, and John’s investment falls by 4% to $9.60.
On Day 3, the underlying security rises by 1.96%, and John’s investment falls by
3.92% to $9.22. For the two-day period the underlying security returned 4% while
John’s investment lost 7.8%. John’s return still correlates to -200% return of
the underlying security.
Example
2 – The Underlying Security Experiences High Volatility
John
invests $10.00 in a 2X Inverse ETF after the close of trading on Day 1. During
Day 2, the underlying security rises from 100 to 102, a 2% gain, and John’s
investment falls 4% to $9.60. John continues to hold his investment through the
end of Day 3, during which the underlying security declines from 102 to 98, a
loss of 3.92%. John’s investment rises by 7.84%, from $9.60 to $10.35. For the
two-day period since John invested in the Fund, the underlying security lost 2%
while John’s investment increased from $10 to $10.35, a 3.5% gain. The
volatility of the underlying security affected the correlation between the
underlying security’s return for the two-day period and John’s return. In this
situation, John gained less than two times the return of the underlying
security.
Example
3 – Intra-day Investment with Volatility
The
examples above assumed that Mary purchased the Fund at the close of trading on
Day 1 and sold her investment at the close of trading on a subsequent day.
However, if she made an investment intra-day, she would have received exposure
determined by the performance of the underlying security from the end of the
prior trading day until her time of purchase on the next trading day. Consider
the following example.
Mary
invests $10.00 in a 2X Inverse ETF at 11 a.m. on Day 2. From the close of
trading on Day 1 until 11 a.m. on Day 2, the underlying security moved from 100
to 102, a 2% gain. In light of that gain, the Fund exposure at the point at
which Mary invests is approximately -204%. During the remainder of Day 2, the
underlying security rises from 102 to 110, a gain of 7.84%, and Mary’s
investment declines by approximately 16.0% to approximately $8.40, reflecting
the Fund’s approximately -204% exposure to the underlying security during that
period. Mary continues to hold her investment through the close of trading on
Day 3, during which the underlying security declines from 110 to 90, a loss of
18.18%. Mary’s investment increases by approximately 36.4%, from $8.40 to
approximately $11.46. For the period of Mary’s investment, the underlying
security declined from 102 to 90, a loss of 11.76%, while Mary’s investment
increased from $10.00 to approximately $11.46, a gain of approximately 14.6%.
The volatility of the underlying security affected the correlation between the
underlying security’s return for the period and Mary’s return. In this
situation, Mary achieved a return that was less than 200% of the inverse return
of the underlying security for the period. Mary was also affected because she
missed the first 2% move of the underlying security and had approximately -204%
exposure for the remainder of Day 2.
Market
Volatility. Each Fund seeks to provide a return which is a multiple of the
inverse daily performance of the underlying security. No Fund attempts to, and
should not be expected to, provide returns which are a multiple of the return of
the underlying security for periods other than a single day. Each Fund
rebalances its portfolio on a daily basis,
increasing
inverse exposure in response to that day’s gains and reducing inverse exposure
in response to that day’s losses.
Daily
rebalancing will generally impair a Fund’s performance if the underlying
security experiences volatility. For instance, a 2X Inverse ETF would be
expected to lose approximately 12% (as shown in Table 1 below) if the underlying
security provided no return over a one-year period and experienced annualized
volatility of 20%. If the underlying security’s annualized volatility were to
rise to 40%, the hypothetical loss for a one-year period for a 2X Inverse ETF
would rise to approximately 45%.
Table
1
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| Volatility
Range |
Each
2X Inverse ETF Losses |
| 10% |
-3% |
| 20% |
-12% |
| 30% |
-26% |
| 40% |
-45% |
| 50% |
-65% |
| 60% |
-92% |
| 70% |
-99% |
| 80% |
-99% |
| 90% |
-99% |
| 100% |
-99% |
Note
that at higher volatility levels, there is a chance of a complete loss of Fund
assets even if the underlying security is flat.
For instance, if annualized volatility of the underlying security was 90%, a 2X
Inverse ETF would be expected to lose 99% of its value, even if the underlying
security returned 0% for the year.
Table
2 shows the annualized historical volatility rate for the underlying security
over the five-year period ended December 31, 2025. Since market volatility has
negative implications for funds which rebalance daily, investors should be sure
to monitor and manage their investments in the Funds particularly in volatile
markets. The negative implications of volatility in Table 1 can be combined with
the recent volatility in Table 2 to give investors some sense of the risks of
holding a Fund for longer periods over the past five years. Historical
volatility and performance are not likely indicative of future volatility and
performance.
Table
2 – Historic Volatility of the Underlying Security
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| The
Underlying Security |
5-Year
Historical
Volatility
Rate |
|
DRAM |
N/A* |
*
The underlying security began trading in calendar year 2026 and as of the date
of this prospectus, does not have a track record of historical daily
volatility.
The
Projected Returns of the Fund for Intra-Day Purchases. Because
the Fund rebalances its portfolio once daily, an investor who purchases shares
during a day will likely have more, or less, than 200% leveraged investment
exposure to the underlying security. The exposure to the underlying security
received by an investor who purchases a Fund intra-day will differ from the
Fund’s stated daily leveraged investment objective (e.g., -200%) by an amount
determined by the movement of the underlying security from their value at the
end of the prior day. If the underlying security moves in a direction favorable
to the Fund between the close of the market on one trading day through the time
on the next trading day when the investor purchases the Fund shares, the
investor will receive less exposure to the underlying
security
than the stated fund daily leveraged investment objective (e.g., -200%).
Conversely, if the underlying security moves in a direction adverse to the Fund,
the investor will receive more exposure to the underlying security than the
stated fund daily leveraged investment objective (e.g., -200%).
Table
3 below indicates the exposure to the underlying security that an intra-day
purchase of a 2X Inverse ETF would be expected to provide based upon the
movement in the value of the underlying security from the close of the market on
the prior trading day. Such exposure holds until a subsequent sale on that same
trading day or until the close of the market on that trading day. For instance,
if the underlying security has moved 5% in a direction favorable to the Fund,
the investor would receive exposure to the performance of the underlying
security from that point until the investor sells later that day or the end of
the day equal to approximately -173% of the investor’s investment. Conversely,
if the underlying security has moved 5% in a direction unfavorable to the
Fund’s, an investor would receive exposure to the performance of the underlying
security from that point until the investor sells later that day or the end of
the day equal to approximately 233% of the investor’s investment.
The
table includes a range of the underlying security moves from 20% to -20% for a
2X Inverse ETF. Movement of the underlying security beyond the range noted below
will result in exposure further from the Fund’s daily leveraged investment
objective.
Table
3 – Intra-Day Leverage of a 2X Inverse ETF
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| The
Underlying Security |
Resulting
Exposure for a 2X Inverse ETF |
| -20% |
-114% |
| -15% |
-131% |
| -10% |
-150% |
| -5% |
-173% |
| 0% |
-200% |
| 5% |
-233% |
| 10% |
-275% |
| 15% |
-329% |
| 20% |
-400% |
The
Projected Returns of the Fund for Periods Other Than a Single Trading
Day.
The Fund seeks leveraged investment results on a daily basis — from the close of
regular trading on one trading day to the close on the next trading day — which
should not be equated with seeking a leveraged investment objective for any
other period. For instance, if the underlying security gains 10% for a week, a
Fund should not be expected to provide a return of -20% for the week even if it
meets its daily leveraged investment objective throughout the week. This is true
because of the financing charges noted above but also because the pursuit of
daily goals may result in daily leveraged compounding, which means that the
return of the underlying security over a period of time greater than one day
multiplied by the Fund’s inverse daily leveraged investment objective (e.g.,
-200%) will not generally equal a Fund’s performance over that same period. In
addition, the effects of compounding become greater the longer Shares are held
beyond a single trading day.
The
following tables set out a range of hypothetical daily performances during a
given 10 trading days of a hypothetical underlying security and demonstrate how
changes in the hypothetical underlying security impacts the hypothetical Fund's
performance for a trading day and cumulatively up to, and including, the entire
10 trading day period. The charts are based on a hypothetical $100 investment in
the hypothetical Fund over a 10-trading day period and do not reflect fees or
expenses of any kind.
Table
4 – The Underlying Security Lacks a Clear Trend
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| The
Underlying Security |
2X
Inverse ETF* |
|
Value |
Daily
Performance |
Cumulative
Performance |
NAV |
Daily
Performance |
Cumulative
Performance |
|
100 |
|
|
$100.00 |
|
|
| Day
1 |
105 |
5.00% |
5.00% |
$90.00 |
-10.00% |
10.00% |
| Day
2 |
110 |
4.76% |
10.00% |
$81.43 |
-9.52% |
18.57% |
| Day
3 |
100 |
-9.09% |
0.00% |
$96.23 |
18.18% |
-3.67% |
| Day
4 |
90 |
-10.00% |
-10.00% |
$115.48 |
20.00% |
15.48% |
| Day
5 |
85 |
-5.56% |
-15.00% |
$128.31 |
11.12% |
28.33% |
| Day
6 |
100 |
17.65% |
0.00% |
$83.03 |
-35.30% |
-16.97% |
| Day
7 |
95 |
-5.00% |
-5.00% |
$91.33 |
-10.00% |
-8.67% |
| Day
8 |
100 |
5.26% |
0.00% |
$81.71 |
-10.52% |
-18.28% |
| Day
9 |
105 |
5.00% |
5.00% |
$73.54 |
-10.00% |
-26.45% |
| Day
10 |
100 |
-4.76% |
0.00% |
$80.55 |
9.52% |
-19.45% |
*Figures
in this table have been rounded for convenience.
The
cumulative performance of the hypothetical underlying security in Table 4 is 0%
for 10 trading days. The return of the hypothetical 2X Inverse ETF is -19.45%.
The volatility of the hypothetical underlying security’s performance and lack of
a clear trend results in performance for each hypothetical Fund for the period
which bears little relationship to the performance of the hypothetical
underlying security for the 10-trading day period.
Table
5 – The Underlying Security Rises in a Clear Trend
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| The
Underlying Security |
Each
2X Inverse ETF* |
|
Value |
Daily
Performance |
Cumulative
Performance |
NAV |
Daily
Performance |
Cumulative
Performance |
|
100 |
|
|
$100.00 |
|
|
| Day
1 |
102 |
2.00% |
2.00% |
$96.00 |
-4.00% |
-4.00% |
| Day
2 |
104 |
1.96% |
4.00% |
$92.24 |
-3.92% |
-7.76% |
| Day
3 |
106 |
1.92% |
6.00% |
$88.69 |
-3.84% |
-11.31% |
| Day
4 |
108 |
1.89% |
8.00% |
$85.34 |
-3.78% |
-14.66% |
| Day
5 |
110 |
1.85% |
10.00% |
$82.18 |
-3.70% |
-17.82% |
| Day
6 |
112 |
1.82% |
12.00% |
$79.19 |
-3.64% |
-20.81% |
| Day
7 |
114 |
1.79% |
14.00% |
$76.36 |
-3.58% |
-23.64% |
| Day
8 |
116 |
1.75% |
16.00% |
$73.68 |
-3.50% |
-26.31% |
| Day
9 |
118 |
1.72% |
18.00% |
$71.14 |
-3.44% |
-28.85% |
| Day
10 |
120 |
1.69% |
20.00% |
$68.73 |
-3.38% |
-31.25% |
*Figures
in this table have been rounded for convenience.
The
cumulative performance of the hypothetical underlying security in Table 5 is 20%
for 10 trading days. The return of of the hypothetical 2X Inverse ETF is
-31.25%. In this case, because of the positive hypothetical underlying security
trend, the hypothetical 2X Inverse ETF’s decline is less than 200% of the
hypothetical underlying security gain for the 10-trading day
period.
Table
6 – The Underlying Security Declines in a Clear Trend
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| The
Underlying Security |
Each
2X Inverse ETF* |
|
Value |
Daily
Performance |
Cumulative
Performance |
NAV |
Daily
Performance |
Cumulative
Performance |
|
100 |
|
|
$100.00 |
|
|
| Day
1 |
98 |
-2.00% |
-2.00% |
$104.00 |
4.00% |
4.00% |
| Day
2 |
96 |
-2.04% |
-4.00% |
$108.24 |
4.08% |
8.24% |
| Day
3 |
94 |
-2.08% |
-6.00% |
$112.76 |
4.16% |
12.75% |
| Day
4 |
92 |
-2.13% |
-8.00% |
$117.55 |
4.26% |
17.55% |
| Day
5 |
90 |
-2.17% |
-10.00% |
$122.66 |
4.34% |
22.65% |
| Day
6 |
88 |
-2.22% |
-12.00% |
$128.12 |
4.44% |
28.10% |
| Day
7 |
86 |
-2.27% |
-14.00% |
$133.94 |
4.54% |
33.91% |
| Day
8 |
84 |
-2.33% |
-16.00% |
$140.17 |
4.66% |
40.15% |
| Day
9 |
82 |
-2.38% |
-18.00% |
$146.84 |
4.76% |
46.82% |
| Day
10 |
80 |
-2.44% |
-20.00% |
$154.01 |
4.88% |
53.99% |
*Figures
in this table have been rounded for convenience.
The
cumulative performance of the hypothetical underlying security in Table 6 is
-20% for 10 trading days. The return of the hypothetical 2X Inverse ETF is
53.99%. In this case, because of the negative hypothetical underlying security
trend, the hypothetical 2X Inverse ETF’s gain is greater than 200% of the
hypothetical underlying security decline for the 10-trading day
period.
ADDITIONAL
INFORMATION ABOUT RISK
It
is important that you closely review and understand the risks of investing in
the Fund. The Fund’s NAV and investment return will fluctuate based upon changes
in the value of its portfolio securities. You could lose money on your
investment in the Fund, and the Fund could underperform other investments. There
is no guarantee that the Fund will meet its investment objective. An investment
in the Fund is not a deposit of a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Below
are some of the specific risks of investing in the Fund including the risks of
the investment strategies of the underlying security.
Effects
of Compounding and Market Volatility Risk
The
Fund has a daily investment objective and the Fund’s performance for
periods greater than a trading day will be the result of each day's returns
compounded over the period, which is very likely to differ from an underlying
security’s performance times the stated multiple in the Fund’s investment
objective, before fees and expenses. Compounding affects all investments, but
has a more significant impact on leveraged funds and funds that rebalance
daily.
Over
time, the cumulative percentage increase or decrease in the value of a
Fund’s portfolio may diverge significantly from the cumulative percentage
decrease of 200% of the return of the Fund's underlying security due to the
compounding effect of losses and gains on the returns of the Fund. It also is
expected that a Fund will underperform the return of -200% of its underlying
security in a trendless or flat market.
The
chart below provides examples of how volatility could affect a Fund’s
performance. A security’s volatility rate is a statistical measure of the
magnitude of fluctuations in the returns of the security. Fund performance for
periods greater than one single day can be estimated given any set of
assumptions for the following factors: a) volatility; b) performance; c) period
of time; d) financing rates associated with inverse exposure; e) other Fund
expenses; and f) dividends or interest paid with respect to securities in its
underlying security. The chart below illustrates the impact of two principal
factors – volatility and performance – on Fund performance. The chart
shows estimated Fund returns for a number of combinations of volatility and
performance over a one-year period. Performance shown in the chart assumes that:
(i) no dividends were paid with respect to the securities included in its
underlying security; (ii) there were no Fund expenses; and (iii)
borrowing/lending rates (to obtain inverse exposure) of 0%. If Fund expenses
and/or actual borrowing/lending rates were reflected, the estimated returns
would be different than those shown. Particularly during periods of higher
volatility, compounding will cause results for periods longer than a trading day
to vary from -200% of the performance of the underlying security.
During
periods of higher volatility, the volatility of the underlying security may
affect a Fund’s return as much as, or more than, the return of the underlying
security. The impact of compounding will impact each shareholder differently
depending on the period of time an investment in the Fund is held and the
volatility of the underlying security during a shareholder’s holding period of
an investment in the Fund.
As
shown below, a Fund would be expected to lose 17.1% if its underlying
security provided no return over a one-year period during which the underlying
security experienced annualized volatility of 25%. If the underlying security’s
annualized volatility were to rise to 75%, the hypothetical loss for a one-year
period widens to approximately 81.5%. At higher ranges of volatility, there is a
chance of a significant loss of value in the Fund. For instance, if the
underlying security’s annualized volatility is 100%, the Fund would be expected
to lose approximately 95% of its value, even if the underlying security’s
cumulative return for the year was 0%.
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One
Year |
-200%
One
Year |
Volatility
Rate |
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
120% |
506.5% |
418.1% |
195.2% |
15.6% |
-68.9% |
| -50% |
100% |
288.2% |
231.6% |
88.9% |
-26.0% |
-80.1% |
| -40% |
80% |
169.6% |
130.3% |
31.2% |
-48.6% |
-86.2% |
| -30% |
60% |
98.1% |
69.2% |
-3.6% |
-62.2% |
-89.8% |
| -20% |
40% |
51.6% |
29.5% |
-26.2% |
-71.1% |
-92.2% |
| -10% |
20% |
19.8% |
2.3% |
-41.7% |
-77.2% |
-93.9% |
| 0% |
0% |
-3.0% |
-17.1% |
-52.8% |
-81.5% |
-95.0% |
| 10% |
-20% |
-19.8% |
-31.5% |
-61.0% |
-84.7% |
-95.9% |
| 20% |
-40% |
-32.6% |
-42.4% |
-67.2% |
-87.2% |
-96.5% |
| 30% |
-60% |
-42.6% |
-50.9% |
-72.0% |
-89.1% |
-97.1% |
| 40% |
-80% |
-50.5% |
-57.7% |
-75.9% |
-90.6% |
-97.5% |
| 50% |
-100% |
-56.9% |
-63.2% |
-79.0% |
-91.8% |
-97.8% |
| 60% |
-120% |
-62.1% |
-67.6% |
-81.5% |
-92.8% |
-98.1% |
Holding
an unmanaged position opens the investor to the risk of market volatility
adversely affecting the performance of the investment. The Fund is not
appropriate for investors who do not intend to actively monitor and manage their
portfolios. These tables are intended to underscore the fact that the Fund is
designed as a short-term trading vehicle for investors who intend to actively
monitor and manage their portfolios.
For
additional information and examples demonstrating the effects of volatility
and performance on the long-term performance of the Fund, see the “Additional
Information About Investment Techniques and Policies.”
Leverage
Risk. To
achieve its daily investment objective, the Fund employs leverage and are
exposed to the risk that adverse daily performance of the Fund's underlying
security will be magnified. This means that, if a Fund's underlying security
experiences adverse daily performance (meaning an increase in the value of the
underlying security of each 2X Inverse ETF), an investment in the Fund will be
reduced by an amount equal to 2% for every 1% of adverse performance, not
including the costs of financing leverage and other operating expenses, which
would further reduce its value.
A
Fund could theoretically lose an amount greater than its net assets if its
underlying security moves more than 50% in a direction adverse to the Fund
(meaning an increase in the value of the underlying security of each 2X Inverse
ETF). This would result in a total loss of a shareholder’s investment in one day
even if its underlying security subsequently moves in the opposite direction and
eliminates all or a portion of its earlier daily change. A total loss may occur
in a single day even if its underlying security does not lose all of its value.
Leverage will also have the effect of magnifying any differences in the Fund’s
correlation with the underlying security or may increase the Fund’s
volatility.
To
the extent that the instruments utilized by the Fund is thinly traded or have a
limited market, a Fund may be unable to meet its investment
objective due to a lack of available investments or
counterparties. During such periods, the Fund’s ability to issue additional
Creation Units may be adversely affected. As a result, the Fund’s shares could
trade at a premium or discount to their NAV and/or the bid-ask spread of the
Fund’s shares could widen. Under such circumstances, the Fund may increase its
transaction fee, change its investment objective by, for example, seeking
to track an alternative underlying security, reduce its leverage or
close.
In
such circumstances, the Fund’s investment adviser will consult with counsel to
the Trust and its Board of Trustees, and if determined to be necessary, the Fund
will amend and/or supplement the prospectus as promptly as feasible under the
circumstances to include appropriate disclosures.
Derivatives
Risk.
A Fund may obtain exposure through derivatives by investing in swap
agreements. Investing in derivatives may be considered aggressive and may
expose a Fund to risks different from, and possibly greater
than, risks
associated
with investing directly in the reference asset(s) underlying the
derivative. The use of derivatives may result in larger losses or smaller
gains than investing in the underlying security directly. The use of derivatives
may expose a Fund to additional risks such as counterparty risk, liquidity risk
and increased daily correlation risk. When a Fund uses derivatives, there may be
imperfect correlation between the value of the underlying reference assets and
the derivative, which may prevent a Fund from achieving its investment
objective.
A
Fund expects to use a combination of swaps on the underlying security. The
performance of an ETF may not track the performance of its underlying security
due to embedded costs and other factors. Thus, to the extent a Fund invests in
swaps that use an ETF as the reference asset, the Fund may be subject to greater
correlation risk and may not achieve as high a degree of correlation with its
underlying security as it would if the Fund only used swaps on the underlying
security. If the underlying security has a dramatic move in price that causes a
material decline in a Fund’s NAV over certain stated periods agreed to by the
Fund and the counterparty, the terms of the swap agreement between a Fund and
its counterparty may allow the counterparty to immediately close out of all swap
transactions with a Fund. In such circumstances, a Fund may be unable to enter
into another swap agreement or invest in other derivatives to achieve the
desired exposure consistent with a Fund’s daily leveraged investment objective.
This may prevent a Fund from achieving its daily leveraged investment objective
even if the underlying security reverses all or a portion of its price movement.
The value of an investment in the Fund may change quickly and without warning.
Any financing, borrowing or other costs associated with using derivatives may
also have the effect of lowering a Fund’s return. Such costs may increase as
interest rates rise.
Swaps
Risk.
Swap agreements are entered into with financial institutions for a specified
period which may range from one day to more than one year. In a standard swap
transaction, two parties agree to exchange the return (or differentials in rates
of return) earned or realized on particular predetermined reference or
underlying securities or instruments. The gross return to be exchanged or
swapped between the parties is calculated based on a notional amount or the
return on or change in value of a particular dollar amount invested in a
reference asset. Swap agreements are generally traded over-the-counter, and
therefore, may not receive as much regulatory protection, which may exposure
investors to significant losses.
Counterparty
Risk.
Counterparty risk is the risk that a counterparty is unwilling or unable to
make timely payments to meet its contractual obligations with respect to the
amount a Fund expects to receive from a counterparty to a financial instrument
entered into by the Fund. The Fund generally enters into derivatives
transactions, such as the swap agreements, with counterparties such that either
party can terminate the contract without penalty prior to the termination
date. If a counterparty terminates a contract, a Fund may not be able to
invest in other derivatives to achieve the desired exposure, or achieving such
exposure may be more expensive. The Fund may be negatively impacted if a
counterparty becomes bankrupt or otherwise fails to perform its obligations
under such a contract, or if any collateral posted by the counterparty for the
benefit of a Fund is insufficient or there are delays in the Fund’s ability to
access such collateral. If the counterparty becomes bankrupt or defaults on its
payment obligations to the Fund, it may experience significant delays in
obtaining any recovery, may obtain only a limited recovery or obtain no recovery
and the value of an investment held by the Fund may decline. The Fund may also
not be able to exercise remedies, such as the termination of transactions,
netting of obligations and realization on collateral, if such remedies are
stayed or eliminated under special resolutions adopted in the United States, the
European Union, and various other jurisdictions. European Union rules and
regulations intervene when a financial institution is experiencing financial
difficulties and could reduce, eliminate, or convert to equity a counterparty’s
obligations to the Fund (sometimes referred to as a “bail in”).
The
Fund typically enters into transactions with counterparties that present
minimal risks based on the Adviser’s assessment of the counterparty’s
creditworthiness, or its capacity to meet its financial obligations during the
term of the derivative agreement or contract. The Adviser considers factors such
as counterparty credit rating among other factors when determining whether a
counterparty is creditworthy. The Adviser regularly monitors the
creditworthiness of each counterparty with which a Fund transacts. The Fund
generally enters into swap agreements or other financial instruments with
financial institutions and seeks to mitigate risks by generally requiring that
the counterparties for the Fund to post collateral, marked to market daily, in
an amount approximately equal to what the counterparty owes a Fund, subject to
certain minimum thresholds. To the extent any such collateral is insufficient or
there are delays in accessing the collateral, the Fund will be exposed to the
risks described above. If a counterparty’s credit ratings decline, the Fund may
be subject to a bail-in, as described above.
In
addition, the Fund may enter into swap agreements with a limited number of
counterparties, which may increase a Fund’s exposure to counterparty credit
risk. A Fund does not specifically limit its counterparty risk with respect to
any single counterparty. There is a risk that no suitable counterparties are
willing to enter into, or continue to enter into, transactions with the Fund
and, as a result, a Fund may not be able to achieve its investment objective or
may decide to change its leveraged investment objective. The risk of a limited
number of counterparties may be, and historically has been, particularly
accentuated during times of significant market volatility. During times of
significant market volatility, the costs to enter into the swaps that the Fund
utilizes may increase significantly, which may negatively impact the Fund’s
returns. While the objective of the Fund is to seek daily investment results,
before
fees and expenses,
of -200% of the daily performance of the underlying security, it is important
for investors to understand that significant increases in the costs of entering
into the swaps may negatively impact investment results after
fees and expenses.
Additionally, although a counterparty to a centrally cleared swap agreement is
often backed by a futures commission merchant (“FCM”) or a clearing organization
that is further backed by a group of financial institutions, there may be
instances in which a FCM or a clearing organization would fail to perform its
obligations, causing significant losses to the Fund.
Rebalancing
Risk.
If for any reason the Fund is unable to rebalance all or a part of its
portfolio, or if all or a portion of the portfolio is rebalanced incorrectly,
the Fund’s investment exposure may not be consistent with its investment
objective. In these instances, the Fund may have investment exposure to the
underlying security that is significantly greater or less than its stated
multiple. The Fund may be more exposed to leverage risk than if it had been
properly rebalanced and may not achieve its investment objective, leading to
significantly greater losses or reduced gains.
Shorting
Risk.
A short position is a financial transaction in which an investor sells an
asset that the investor does not own. In such a transaction, an investor’s short
position appreciates when a reference asset falls in value. By contrast, the
short position loses value when the reference asset’s value increases. Because
historically most assets have risen in value over the long term, short positions
are expected to depreciate in value. Accordingly, short positions may be riskier
and more speculative than traditional investments. In addition, any income,
dividends, or payments by reference assets in which the Fund has a short
position will impose expenses on the Fund that reduce returns.
The
Fund will obtain short exposure through the use of swap agreements,
purchased put options, and physical short sales of DRAM. To the extent that the
Fund obtains short exposure from derivatives, the Fund may be exposed to
heightened volatility or limited liquidity related to the reference asset of the
underlying short position, which will adversely impact the Fund’s ability
to meet its investment objective or adversely impact its performance. If the
Fund were to experience this volatility or decreased liquidity, the Fund may be
required to obtain short exposure through alternative investment strategies that
may be less desirable or more costly to implement. If the reference asset
underlying the short position is thinly traded or has a limited market, there
may be a lack of available securities or counterparties for the Fund to enter
into a short position or obtain short exposure from a derivative. To the extent
the Fund engages in physical short sales, the Fund is subject to the risk that
the price of the security will increase between the date of the short sale and
the date on which the Fund replaces the security, the Fund will experience a
loss, which is theoretically unlimited. In addition, physical short sales do not
provide -200% exposure to DRAM and, as a result, if the Fund engages in physical
short sales to a greater extent, the Fund may not achieve its -200% daily
investment objective.
Intra-Day
Investment Risk.
The Fund seeks daily leveraged investment results, which should not be
equated with seeking an investment objective for shorter than a day. Thus, an
investor who purchases Fund shares after the close of the markets on one trading
day and before the close of the markets on the next trading day will likely have
more, or less, than -200% leveraged investment exposure to the underlying
security, depending upon the movement of the underlying security from the end of
one trading day until the time of purchase. If the underlying security moves in
a direction favorable to a Fund, the investor will receive less than -200%
exposure to the underlying security. Conversely, if the underlying security
moves in a direction adverse to a Fund, the investor will receive exposure to
the underlying security greater than -200%. Thus, an investor that purchases
shares intra-day may experience performance that is greater than, or less than,
a Fund’s stated multiple of its underlying security.
Options
Contracts. The
use of options contracts involves investment strategies and risks different from
those associated with ordinary portfolio securities transactions. The prices of
options are volatile and are influenced by, among other things, actual and
anticipated changes in the value of the underlying instrument, including the
anticipated volatility,
which
are affected by fiscal and monetary policies and by national and international
political, changes in the actual or implied volatility or the reference asset,
the time remaining until the expiration of the option contract and economic
events. The values of the options contracts in which the Fund invests are
substantially influenced by the value of the underlying instrument. The Fund may
experience substantial downside from specific option positions and certain
option positions held by the Fund may expire worthless. The options held by the
Fund are exercisable at the strike price on their expiration date. As an option
approaches its expiration date, its value typically increasingly moves with the
value of the underlying instrument. However, prior to expiry, the value of an
option generally does not increase or decrease at the same rate as the
underlying instrument. There may at times be an imperfect correlation between
the movement in values options contracts and the reference asset, and there may
at times not be a liquid secondary market for certain options contracts. The
value of the options held by the Fund will be determined based on market
quotations or other recognized pricing methods. As the options contracts are
exercised or expire the Fund may enter into new options contracts, a practice
referred to as rolling.
FLEX
Options Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
reference asset. Factors that may influence the value of the FLEX Options, other
than gains or losses in the reference asset, may include interest rate changes,
changing supply and demand, decreased liquidity of the FLEX Options, and
changing volatility levels of the reference asset.
FLEX
Options are listed on an exchange; however, it is not guaranteed that a liquid
secondary trading market will exist. In the event that trading in the FLEX
Options is limited or absent, the value of the FLEX Options may
decrease.
Daily
Inverse Correlation Risk.
There
is no guarantee that a Fund will achieve a high degree of inverse
correlation to the underlying security and therefore achieve its daily inverse
investment objective. A Fund’s exposure to an underlying security is impacted by
an underlying security’s movement. Because of this, it is unlikely that the Fund
will be perfectly exposed to it an underlying security at the end of each day.
The possibility of the Fund being materially over- or under-exposed to an
underlying security increase on days when an underlying security is volatile
near the close of the trading day. Market disruptions, regulatory restrictions
and high volatility will also adversely affect a Fund’s ability to adjust
exposure to the required levels.
A
Fund may have difficulty achieving its daily inverse investment objective
for many reasons, including fees, expenses, transaction costs, financing costs
related to the use of derivatives, investments in ETFs, directly or indirectly,
accounting standards and their application to income items, disruptions,
illiquid or high volatility in the markets for the securities or financial
instruments in which a Fund invests, early and unanticipated closings of the
markets on which the holdings of a Fund trade, resulting in the inability of a
Fund to execute intended portfolio transactions, regulatory and tax
considerations, which may cause a Fund to hold (or not to hold) an underlying
security. The Fund may take or refrain from taking positions in order to improve
tax efficiency, comply with regulatory restrictions, or for other reasons, each
of which may negatively affect the Fund’s inverse correlation with an underlying
security. The Fund may be subject to large movements of assets into and out of
the Fund, potentially resulting in the Fund being over- or under-exposed to an
underlying security. Additionally, the Fund’s underlying investments and/or
reference assets may trade on markets that may not be open on the same day as
the Fund, which may cause a difference between the changes in the daily
performance of the Fund and changes in the performance of an underlying
security. Any of these factors could decrease the inverse correlation
between the performance of a Fund and an underlying security and may hinder the
Fund’s ability to meet its daily inverse investment objective on or around that
day.
Shorting
Risk. Shareholders
will lose money when the underlying security rises, which is a result that
is the opposite from traditional index tracking funds. The Fund may enter into
short positions designed to earn the Fund a profit from the decline in the price
of its underlying security. Although the Fund will typically obtain inverse or
“short” exposure through the use of swap agreements, the Fund may also
obtain short exposure through the use of purchased put options and physical
short sales of the underlying security. To the extent that the Fund seeks short
exposure by purchasing put option or engaging in physical short sales, the Fund
will not obtain -200% exposure to the underlying security and, as a result, the
Fund may not achieve its -200% daily investment objective. Short exposure may
expose the Fund to certain risks such as an increase in volatility or decrease
in the liquidity of the securities or financial instruments
of
the underlying short position. If the Fund were to experience this volatility or
decreased liquidity, the Fund’s return may be lower, the Fund’s ability to
obtain inverse exposure through the use of derivatives may be limited or the
Fund may be required to obtain inverse exposure through alternative investment
strategies that may be less desirable or more costly to implement. If the
securities or financial instruments underlying the short positions are thinly
traded or have a limited market due to various factors, including regulatory
action, the Fund may be unable to meet its investment objective due to a lack of
available securities, financial instruments, or counterparties. The Fund
may not be able to issue additional Creation Units during a period when it
cannot meet its investment objective due to these factors. Any income, dividends
or payments by the assets underlying the Fund’s short positions will negatively
impact the Fund.
Cash
Transaction Risk.
Unlike most ETFs, the Fund effects creation, and redemptions principally
for cash, rather than principally for in-kind securities, because of the nature
of the financial instruments held by the Fund. As such, investment in the Fund
is not expected to be tax efficient and will incur brokerage costs related to
buying and selling securities to achieve the Fund’s investment objective. To the
extent that such costs are not offset by fees payable by an authorized
participant, the Fund may bear such costs, which will decrease the Fund’s net
asset value. ETFs generally are able to make in-kind redemptions and avoid being
taxed on gains on the distributed portfolio securities at the fund level.
Because the Fund effects redemptions principally for cash, the Fund may be
required to sell portfolio securities in order to obtain the cash needed to
distribute redemption proceeds. The Fund may recognize a capital gain on these
sales that might not have been incurred if the Fund had made a redemption
in-kind and this may decrease the tax efficiency of the Fund compared to ETFs
that utilize an in-kind redemption process. Additionally, because the Fund is
conducting the portfolio transactions rather than receiving securities in-kind
the Fund will incur brokerage commissions and other related expenses
thus the Fund’s expenses will be higher than funds that utilize in-kind
creations and redemptions.
Market
Risk.
The Fund’s investments are subject to changes in general economic
conditions, general market fluctuations and the risks inherent in investment in
securities markets. Investment markets can be volatile and prices of investments
can change substantially due to various factors including, but not limited to,
economic growth or recession, inflation rates and/or investor expectations
concerning such rates, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. Securities markets
also may experience long periods of decline in value. During a general downturn
in the securities markets, multiple asset classes may decline in value
simultaneously and changes in the financial condition of a single issuer can
impact a market the markets broadly. The Fund is subject to the risk that
geopolitical events will disrupt markets and adversely affect global economies,
markets, and exchanges. Local, regional, or global events such as war, acts of
terrorism, natural disasters, the spread of infectious illness or other public
health issues, conflicts and social unrest or other events could have a
significant impact on the Fund, its investments and a Fund’s ability to achieve
its investment objective.
Markets
and market participants are increasingly reliant on information data
systems. Inaccurate data, software or other technology malfunctions, programming
inaccuracies, unauthorized use or access and similar circumstances may impair
the performance of these systems and may have an adverse impact upon a single
issuer, a group of issuers, or securities markets more broadly.
Indirect
Investment Risk.
The issuers of the underlying companies are not affiliated with the Trust,
the Adviser, or any affiliates thereof and is not involved with this offering in
any way, and has no obligation to consider the Fund in taking any corporate
actions that might affect the value of the Fund. Investing in the Fund is not
equivalent to investing in a Fund's underlying security. Fund shareholders will
not have voting rights or rights to receive dividends or other distributions or
any other rights with respect to a Fund's underlying security.
Underlying
Security Investing Risk. Issuer-specific
attributes may cause an investment held by the Fund to be more volatile than the
market generally. The value of an individual security or particular type of
security may be more volatile than the market as a whole and may perform
differently from the value of the market as a whole.
Regulatory
Risk. The
Fund is subject to the risk that a change in U.S. law and related regulations
will impact the way a Fund operates, increase the particular costs of the Fund's
operations and/or change the competitive landscape. Additional legislative or
regulatory changes could occur that may materially and adversely affect the
Fund.
DRAM
Investing Risk. In
addition to the risks associated generally with investments in equity
securities, investments in companies involved in DRAM and other semiconductor
memory products are subject to risks associated with the semiconductor and
memory industry, including cyclicality in demand, pricing pressure for memory
products, supply chain disruptions, rapid technological change, and intense
competition.
Other
Investment Companies Risk. To
the extent that the Fund invests in other ETFs or investment companies, the
value of an investment in the Fund is based on the performance of the underlying
funds in which the Fund invests and the allocation of its assets among those
ETFs or investment companies. The underlying ETFs and investment companies may
change their investment goals, policies or practices and there can be no
assurance that the underlying ETFs or investment companies will achieve their
respective investment goals. Because the Fund invests in ETFs and other
investment companies, shareholders indirectly bear a proportionate share of the
expenses charged by the underlying funds in which it invests which impacts the
Fund’s performance. The principal risks of an investment in the Fund include the
principal risks of investing in the underlying ETFs and investment
companies.
The
Fund is exposed to the risks of the underlying ETFs and investment companies in
which it invests in direct proportion to the amount of assets the Fund allocates
to each underlying fund. One underlying fund may buy the same security that
another underlying fund is selling. You would indirectly bear the costs of both
trades. In addition, you may receive taxable gains from portfolio transactions
by the underlying funds, as well as taxable gains from the Fund’s transactions
in shares of the underlying funds. The Fund’s ability to achieve its investment
goal depends, in part, upon the Adviser’s skill in selecting an optimal mix of
underlying funds.
Concentration
Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries, which will subject the Fund to the risk that economic,
political or other conditions that have a negative effect on those sectors
and/or industries may negatively impact the Fund to a greater extent than if the
Fund’s assets were invested in a wider variety of sectors or industries.
Money
Market Instrument Risk.
Money market instruments, including money market funds, depositary accounts
and repurchase agreements may be used for cash management purposes. Money market
funds may be subject to credit risk with respect to the short-term debt
instruments in which they invest. Depository accounts may be subject to credit
risk with respect to the financial institution in which the depository account
is held. Repurchase agreements are contracts in which a seller of securities
agrees to buy the securities back at a specified time and price. Repurchase
agreements may be subject to market and credit risk related to the collateral
securing the repurchase agreement. Money market instruments may also be subject
to credit risks associated with the instruments in which they invest. There is
no guarantee that money market instruments will maintain a stable value, and
they may lose money.
Liquidity
Risk.
Some securities held by a Fund may be difficult to buy or sell or illiquid,
particularly during times of market turmoil. Illiquid securities may be
difficult to value, especially in changing or volatile markets. If a Fund is
forced to buy or sell an illiquid security or derivative instrument at an
unfavorable time or price, a Fund may incur a loss. Certain market conditions
may prevent a Fund from limiting losses, realizing gains, or achieving a high
correlation with its underlying security. There is no assurance that a security
or derivative instrument that is deemed liquid when purchased will continue to
be liquid. Market illiquidity may cause losses for certain funds. For this Fund,
to the extent that a Fund's underlying security moves adversely, a Fund may be
one of many market participants that are attempting to facilitate a transaction.
Under such circumstances, the market may lack sufficient liquidity for all
market participants' trades. Therefore, a Fund may have more difficulty
transacting in the security or correlated derivative instruments and a Fund's
transactions could exacerbate the price change of the security. Additionally,
because a Fund is leveraged, a minor adverse change in the value of underlying
security should be expected to have a substantial adverse impact on a Fund and
impact its ability to achieve its investment objective.
In
certain cases, the market for its underlying security and/or Fund may lack
sufficient liquidity for all market participants' trades. Therefore, a Fund may
have difficulty transacting in it and/or in correlated investments, such as swap
contracts. Further, a Fund's transactions could exacerbate illiquidity and
volatility in the price of the securities and correlated derivative
instruments.
Early
Close/Trading Halt Risk.
Although an underlying security’s shares are listed for trading on an
exchange, there can be no assurance that an active trading market for such
shares will be available at all times. When securities experience a sharp
decline in price, an exchange or market may close entirely or halt for a
period of time in accordance with exchange “circuit breaker” rules or issue
trading halts on specific securities and therefore, a Fund’s ability to buy or
sell certain securities or financial instruments may be restricted. These
exchange or market actions may result in a Fund being unable to buy or sell
certain securities or financial instruments. A Fund may be unable to rebalance
its portfolio, may be unable to accurately price its investments and/or may
incur substantial trading losses. If a Fund is unable to rebalance its portfolio
due to a market closure, a trading halt, an emergency, or other market
disrupting event, it may result in a Fund not achieving its investment objective
and a Fund having a significantly larger leverage multiple than 200%, which may
result in significant losses to Fund shareholders in certain
circumstances.
Additionally,
exchange or market closures or trading halts may result in a Fund’s shares
trading at an increasingly large discount to NAV and/or at increasingly wide
bid-ask spreads during part of, or all of, the trading day.
Equity
Securities Risk. Publicly-issued
equity securities, including common stocks, are subject to market risks
that may cause their prices to fluctuate over time. Fluctuations in the value of
equity securities in which a Fund invests will cause the NAV of the Fund to
fluctuate. The Fund’s direct investments in shares of the underlying security
does not provide leveraged exposure to the underlying security and, as a result,
if a Fund invests directly in shares of the underlying security to a greater
extent, the Fund may not achieve its -200% daily investment
objective.
Synthetic
Exposure Risk.
The Fund’s synthetic inverse positions involve many of the same risks as
shorting the securities of the underlying security, but also involve additional
risks associated with the use of derivatives. There may be imperfect correlation
between the performance of the underlying security and the performance of the
Fund’s swap agreements or other derivative instruments as a result of changes in
implied volatility, bid/ask spreads, transaction costs, financing costs,
counterparty exposure and other market factors. Derivatives strategies may also
be subject to different tax treatment than holding or shorting the underlying
security directly. The Fund’s synthetic positions may not always provide -200%
exposure to the underlying security and, as a result, the Fund may not achieve
its -200% daily investment objective.
Tax
Risk.
In order to qualify for the special tax treatment accorded a regulated
investment company (“RIC”) and its shareholders, the Fund must derive at least
90% of its gross income for each taxable year from “qualifying
income,” meet certain asset diversification tests at the end of each
taxable quarter, and meet annual distribution requirements. The Fund’s
pursuit of its investment strategy will potentially be limited
by a Fund’s intention to qualify for such treatment and
could adversely affect the Fund’s ability to so qualify. The Fund can
make certain investments, the treatment of which for these purposes is
unclear. If, in any year, the Fund were to fail to qualify for the special
tax treatment accorded a RIC and its shareholders, and were ineligible to or
were not to cure such failure, a Fund would be taxed in the same manner as an
ordinary corporation subject to U.S. federal income tax on all its
income at the fund level. The resulting taxes could substantially reduce the
Fund’s net assets and the amount of income available for distribution. In
addition, in order to requalify for taxation as a RIC, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest, and make certain distributions. Please see the section
entitled “Taxes” in the SAI for more information.
Non-Diversification
Risk.
The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended. This means it has the ability to
invest a relatively high percentage of its assets in the securities of a small
number of issuers or in financial instruments with a single counterparty or a
few counterparties. This may increase a Fund’s volatility and increase the risk
that a Fund’s performance will decline based on the performance of a single
issuer or the credit of a single counterparty and make the Fund more
susceptible to risks associated with a single economic, political, or
regulatory occurrence than a diversified fund.
New
Fund Risk.
The Fund is a new ETF and as a new fund, there can be no assurance that the Fund
will grow to or maintain an economically viable size, in which case it could
ultimately liquidate. The Fund’s distributor does not maintain a secondary
market in the Fund’s shares. If the Fund does not grow its assets to a viable
level, it may be difficult for the Adviser to implement the Fund’s investment
strategies and achieve the desired portfolio diversification.
Special
Risks of Exchange-Traded Funds
Authorized
Participants Concentration Risk. The
Fund may have a limited number of financial institutions that may act as
Authorized Participants. To the extent that those Authorized Participants exit
the business or are unable to process creation and/or redemption orders, Shares
may trade at larger bid-ask spreads and/or premiums or discounts to NAV.
Authorized Participant concentration risk may be heightened for a fund that
invests in non-U.S. securities or other securities or instruments that have
lower trading volumes.
Absence
of Active Market Risk.
Although Shares are listed for trading on a stock exchange, there is no
assurance that an active trading market for them will develop or be maintained.
In the absence of an active trading market for Shares, they will likely trade
with a wider bid/ask spread and at a greater premium or discount to
NAV.
Market
Price Variance Risk.
Shares of a Fund can be bought and sold in the secondary market at market prices
rather than at NAV. When Shares trade at a price greater than NAV, they are said
to trade at a “premium.” When they trade at a price less than NAV, they are said
to trade at a “discount.” The market price of Shares fluctuates based on changes
in the value of a Fund’s holdings and on the supply and demand for Shares.
Because Shares can be created and redeemed in Creation Units at NAV, the
Adviser believes that large discounts or premiums to the net asset value of
Shares should not be sustained over the long term. Nevertheless, the market
price of Shares may vary significantly from NAV during periods of market
volatility. Further, to the extent that exchange specialists, market makers
and/or Authorized Participants are unavailable or unable to trade a Fund’s
Shares and/or create and redeem Creation Units, bid/ask spreads and premiums or
discounts may widen. The exact exposure of an investment in a Fund intraday in
the secondary market is a function of the difference between the value of the
underlying security at the market close on the first trading day and the value
of the underlying security at the time of purchase. Thus, an investor that
purchases shares intra-day may experience performance that is greater than, or
less than, a Fund’s stated multiple of its underlying security.
Trading
Cost Risk.
Buying or selling Fund shares on an exchange involves two types of costs that
apply to all securities transactions. When buying or selling shares of a Fund
through a broker, you will likely incur a brokerage commission and other
charges. In addition, you may incur the cost of the “spread”; that is, the
difference between what investors are willing to pay for Fund shares (the “bid”
price) and the price at which they are willing to sell Fund shares (the “ask”
price). The spread, which varies over time for shares of a Fund based on trading
volume and market liquidity, is generally narrower if the Fund has more trading
volume and market liquidity and wider if the Fund has less trading volume and
market liquidity. In addition, increased market volatility may cause wider
spreads. There may also be regulatory and other charges that are incurred as a
result of trading activity. Because of the costs inherent in buying or selling
Fund shares, frequent trading may detract significantly from investment results
and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments through a brokerage
account.
Exchange
Trading Risk.
Trading in Shares on an exchange may be halted due to market conditions or for
reasons that, in the view of that exchange, make trading in Shares inadvisable,
such as extraordinary market volatility or other reasons. Extraordinary market
volatility can lead to trading halts pursuant to “circuit breaker” rules of the
exchange or market. There can be no assurance that Shares will continue to meet
the listing requirements of the exchange on which they trade, and the listing
requirements may be amended from time to time.
MANAGEMENT
The
Investment Adviser.
Tuttle Capital Management, LLC (the “Adviser”), 155 Lockwood Rd., Riverside,
Connecticut 06878, is the investment adviser for the Fund. The Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. The Adviser is a Delaware limited liability company and was
organized in 2012.
Under
the Investment Advisory Agreement between the Adviser and the Trust, on behalf
of the Fund (the “Investment Advisory Agreement”), the Adviser is responsible
for the day-to-day management of the Fund’s investments. The Adviser also: (i)
furnishes the Fund with office space and certain administrative services; and
(ii) provides guidance and policy direction in connection with its daily
management of the Fund’s assets, subject to the authority of the Board. For
its
services, the Adviser is entitled to receive an annual management fee calculated
daily and payable monthly, at the annual rate of 1.50% of the Fund’s average
daily net assets.
Under
the Investment Advisory Agreement, the Adviser has agreed, at its own expense
and without reimbursement from the Fund, to pay all expenses of the Fund, except
for: the fee paid to the Adviser pursuant to the Investment Advisory Agreement,
interest expenses, taxes, acquired fund fees and expenses, brokerage commissions
and any other portfolio transaction related expenses and fees arising out of
transactions effected on behalf of the Fund, credit facility fees and expenses,
including interest expenses, and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund’s
business.
A
discussion regarding the basis for the Board approving the Investment Advisory
Agreement for the Fund will be available in the Fund’s semi-annual report filed
on Form N-CSR once that report is produced.
Fund
Sponsor
REX
Shares, LLC (“REX”or the "Sponsor"), a Delaware limited liability company,
located in Miami, Florida, is an independent sponsor of ETFs. The research of an
affiliate of REX was used in the creation of the Fund’s trading strategy. REX
does not make investment decisions, provide investment advice, or otherwise act
in the capacity of an investment adviser to the Fund. REX is not related to the
Adviser, the Fund or any of the underlying securities of the Fund. REX makes no
representation or warranty, express or implied, to the owners of the Shares or
any member of the public regarding the advisability of investing in securities
generally or in the Shares in particular, or as to the ability of any Fund to
meet its investment objective.
The
Adviser has entered into an agreement with the Sponsor pursuant to which the
Sponsor and the Adviser have jointly assumed the obligation of the Adviser to
pay all expenses of the Fund, except excluded expenses. The Sponsor will also
provide marketing support for the Fund including, but not limited to, providing
the Fund with access to and the use of the Sponsor’s marketing capabilities,
including leveraging the Sponsor’s expertise in developing marketing strategies
and communications through print and electronic media. For its services, the
Sponsor is entitled to a fee from the Adviser, which is calculated daily and
paid monthly, based on a percentage of the average daily net assets of the Fund.
The Sponsor does not act as a distributor to the Fund and does not sell shares
of the Fund. The Fund is distributed through the Distributor.
The
Portfolio Manager
Matthew
Tuttle, Chief Executive Officer of the Adviser, has served as the Fund’s
portfolio manager since its inception in 2026. Matthew Tuttle has been involved
in the financial services industry since 1990. He has an MBA in finance from
Boston University and is the author of two financial books, Financial
Secrets of My Wealthy Grandparents
and How
Harvard and Yale Beat the Market.
He has been launching and managing ETFs since 2015.
The
SAI provides additional information about the portfolio manager’s compensation,
other accounts managed by the portfolio manager, and the portfolio manager’s
ownership in the Fund.
The
Trust
The
Fund is a non-diversified series of the ETF Opportunities Trust, an open-end
management investment company organized as a Delaware statutory trust on March
18, 2019. The Board supervises the operations of the Fund according to
applicable state and federal law, and the Board is responsible for the overall
management of the Fund’s business affairs.
Portfolio
Holdings
A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities is available in the Fund’s SAI. Complete
holdings are published on the Fund’s website on a daily basis. Please visit the
Fund’s website at www.rexshares.com. In addition, the Fund’s complete holdings
(as of the dates of such reports) are available in reports on Form N-PORT and
Form N-CSR filed with the SEC.
DISTRIBUTION
(12B-1) PLAN
The
Board has adopted a Distribution and Shareholder Service Plan (the “Plan”)
pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Plan, the Fund
is authorized to pay an amount up to 0.25% of its average daily net assets each
year for certain distribution-related activities and shareholder
services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no current plans
to impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of the Fund’s assets, over time these fees
will increase the cost of your investment and may cost you more than certain
other types of sales charges.
HOW
TO BUY AND SELL SHARES
Most
investors will buy and sell shares of the Fund through broker-dealers at market
prices. Shares of the Fund are listed for trading on the Exchange and on the
secondary market during the trading day and can be bought and sold throughout
the trading day like other shares of publicly traded securities. Shares may only
be purchased and sold on the secondary market when the Exchange is open for
trading. Shares of the Fund are traded under the trading symbol
[XXXX].
When
buying or selling shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offered price in the secondary market on each leg of a round trip
(purchase and sale) transaction.
The
NAV of the Fund’s shares is calculated at the close of regular trading on the
Exchange, generally 4:00 p.m. New York time, on each day the Exchange is open.
The NAV of the Fund’s Shares is determined by dividing the total value of the
Fund’s portfolio investments and other assets, less any liabilities, by the
total number of Shares outstanding of the Fund.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments.
Fair
value pricing is used by the Fund when market quotations are not readily
available or are deemed to be unreliable or inaccurate based on factors such as
evidence of a thin market in the security or a significant event occurring after
the close of the market but before the time as of which the Fund’s NAV is
calculated. When fair-value pricing is employed, the prices of securities used
by the Fund to calculate its NAV may differ from quoted or published prices for
the same securities.
APs
may acquire shares directly from the Fund, and APs may tender their shares for
redemption directly to the Fund, at NAV per share only in large blocks, or
Creation Units, of at least XX,XXX shares. Purchases and redemptions directly
with the Fund must follow the Fund’s procedures, which are described in the
SAI.
Under
normal circumstances, the Fund will pay out redemption proceeds to a redeeming
AP within two (2) days after the AP’s redemption request is received, in
accordance with the process set forth in the Fund’s SAI and in the agreement
between the AP and the Fund’s distributor. However, the Fund reserves the right,
including under stressed market conditions, to take up to seven (7) days after
the receipt of a redemption request to pay an AP, all as permitted by the 1940
Act. The Fund anticipates regularly meeting redemption requests primarily in
cash, although the Fund reserves the right to pay all or portion of the
redemption proceeds to an AP in-kind. Cash used for redemptions will be raised
from the sale of portfolio assets or may come from existing holdings of cash or
cash equivalents.
The
Fund may liquidate and terminate at any time without shareholder
approval.
Book
Entry
Shares
are held in book entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding shares and is recognized as the owner of all shares for all
purposes.
Investors
owning shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all shares.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of stock certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other securities that you
hold in book entry or “street name” form.
FREQUENT
PURCHASES AND REDEMPTIONS OF FUND SHARES
Shares
can only be purchased and redeemed directly from the Fund in Creation Units by
APs, and the vast majority of trading in shares occurs on the secondary market.
Because the secondary market trades do not directly involve the Fund, it is
unlikely those trades would cause the harmful effects of market timing,
including dilution, disruption of portfolio management, increases in the Fund’s
trading costs and the realization of capital gains. With regard to the purchase
or redemption of Creation Units directly with the Fund, to the extent effected
in-kind (i.e.,
for securities), those trades do not cause the harmful effects that may result
from frequent cash trades. To the extent trades are effected in whole or in part
in cash, those trades could result in dilution to the Fund and increased
transaction costs, which could negatively impact the Fund’s ability to achieve
its investment objective. However, direct trading by APs is critical to ensuring
that shares trade at or close to NAV. The Fund also employs fair valuation
pricing to minimize potential dilution from market timing. In addition, the Fund
imposes transaction fees on purchases and redemptions of shares to cover the
custodial and other costs incurred by the Fund in effecting trades. These fees
increase if an investor substitutes cash in part or in whole for securities,
reflecting the fact that the Fund’s trading costs increase in those
circumstances. Given this structure, the Trust has determined that it is not
necessary to adopt policies and procedures to detect and deter market timing of
the shares.
DIVIDENDS,
OTHER DISTRIBUTIONS AND TAXES
Shares
are traded throughout the day in the secondary market on a national securities
exchange on an intra-day basis and are created and redeemed in-kind and/or for
cash in Creation Units at each day’s next calculated NAV. The Fund currently
intends to create and redeem Creation Units in cash. Satisfying redemptions in
cash may result in the Fund selling portfolio securities to obtain cash to meet
net Fund redemptions which can have an adverse tax impact on taxable
shareholders. These sales may generate taxable gains for the ongoing
shareholders of the Fund. In-kind arrangements are designed to protect ongoing
shareholders from the adverse effects on the Fund’s portfolio that could arise
from frequent cash redemption transactions. In the event that the Fund redeems
Creation Units in-kind, the shares’ in-kind redemption mechanism generally will
not lead to a tax event for the Fund or its ongoing shareholders.
Ordinarily,
the Fund will distribute any net investment income and any net realized capital
gains annually. The Fund may also pay a special distribution at the end of a
calendar year to comply with U.S. federal income tax requirements.
No
dividend reinvestment service is provided by the Fund. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of the Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this
service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole shares of
the Fund purchased in the secondary market.
Distributions
in cash may be reinvested automatically in additional whole shares only if the
broker through whom you purchased shares makes such option
available.
Taxes
As
with any investment, you should consider how your investment in shares will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in shares.
Unless
your investment in shares is made through a tax-exempt entity or tax-deferred
account, such as an individual retirement account, you need to be aware of the
possible tax consequences when:
-A
Fund makes distributions,
-You
sell your shares listed on the Exchange, and
-You
purchase or redeem Creation Units.
Taxes
on Distributions
Distributions
from the Fund’s net investment income, including net short-term capital gains,
if any, are taxable to you as ordinary income, except that the Fund’s dividends
attributable to its “qualified dividend income” (e.g.,
dividends received on stock of most domestic and certain foreign corporations
with respect to which the Fund satisfies certain holding period and other
requirements), if any, generally are subject to U.S. federal income tax for U.S.
non-corporate shareholders who satisfy those restrictions with respect to their
shares at the rate for net capital gain. A part of the Fund’s dividends also may
be eligible for the dividends-received deduction allowed to U.S. corporations
subject to similar requirements. However, dividends a U.S. corporate shareholder
deducts pursuant to that deduction are subject indirectly to the U.S. federal
alternative minimum tax. A higher portfolio turnover rate may indicate higher
transaction costs and may result in higher taxes when Fund shares are held in a
taxable account. These costs, which are not reflected in annual Fund operating
expenses affect the Fund’s performance.
In
general, distributions received from the Fund are subject to U.S. federal income
tax when they are paid, whether taken in cash or reinvested in the Fund (if that
option is available). Distributions reinvested in additional shares through the
means of a dividend reinvestment service, if available, will be taxable to
shareholders acquiring the additional shares to the same extent as if such
distributions had been received in cash. Distributions of net long-term capital
gains, if any, in excess of net short-term capital losses are taxable as
long-term capital gains, regardless of how long you have held the shares in a
Fund.
Distributions
in excess of a Fund’s current and accumulated earnings and profits are treated
as a tax-free return of capital to the extent of your basis in the shares and as
capital gain thereafter. A distribution will reduce a Fund’s NAV per share and
may be taxable to you as ordinary income or capital gain (as described above)
even though, from an investment standpoint, the distribution may constitute a
return of capital.
The
Fund is required to backup withhold twenty-four percent (24%) of your
distributions and redemption proceeds if you have not provided the Fund with a
correct Social Security number for individual(s) in the required manner and in
certain other situations.
Taxes
on Exchange-Listed Share Sales
Any
capital gain or loss realized upon a sale of shares is generally treated as
long-term capital gain or loss if the shares have been held for more than one
year and as short-term capital gain or loss if the shares have been held for one
year or less. The ability to deduct capital losses from sales of shares may be
limited.
Taxes
on Purchase and Redemption of Creation Units
An
Authorized Participant who exchanges securities for Creation Units generally
will recognize a gain or a loss equal to the difference between the market value
of the Creation Units at the time of the exchange and the sum of the exchanger’s
aggregate basis in the securities surrendered plus any cash it pays. An
Authorized Participant who exchanges Creation Units for securities will
generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the Creation Units and the sum of the aggregate market
value of the securities received plus any cash received. The Internal Revenue
Service (“Service”), however, may assert that a loss realized upon an exchange
of securities for Creation Units cannot be deducted currently under the rules
governing “wash sales” or for other reasons.
Persons
exchanging securities should consult their own tax adviser with respect to
whether the wash sale rules apply and when a loss might be
deductible.
Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as long-term capital gain or loss if the Creation Units have been held
for more than one year and as short-term capital gain or loss if the Creation
Units have been held for one year or less.
If
you purchase or redeem Creation Units, you will be sent a confirmation statement
showing how many Creation Units you purchased or sold and at what price. See
“Taxes” in the SAI for a description of the requirement regarding basis
determination methods applicable to share redemptions (including redemptions of
Creation Units) and the Fund’s obligation to report basis information to the
Service.
At
the time that this prospectus is being prepared, various administrative and
legislative changes to the U.S. federal tax laws are under consideration, but it
is not possible at this time to determine whether any of these changes will take
place or what the changes might entail.
The
foregoing discussion summarizes some of the possible consequences under current
U.S. federal income tax law of an investment in the Fund. It is not a substitute
for personal tax advice. Consult your personal tax adviser about the potential
tax consequences of an investment in the shares under all applicable tax laws.
See “Taxes” in the SAI for more information.
FUND
SERVICE PROVIDERS
Commonwealth
Fund Services, Inc.
(the “Administrator”) is the Fund’s administrator. The firm is primarily in the
business of providing administrative services to retail and institutional mutual
funds and exchange-traded funds.
[_____________]
serves
as the Fund’s fund accountant, and it provides certain other services to the
Fund not provided by the Administrator. [__________] is primarily in the
business of providing administrative, fund accounting services to retail and
institutional exchange-traded funds and mutual funds.
As
transfer agent,
[__________],
has, among other things, agreed to: issue and redeem shares of the Fund; make
dividend and other distributions to shareholders of the Fund; effect transfers
of shares; mail communications to shareholders of the Fund, including account
statements, confirmations, and dividend and distribution notices; facilitate the
electronic delivery of shareholder statements and reports; and maintain
shareholder accounts.
[__________]
acts
as custodian for the Fund. As such, [__________]
holds all securities and cash of the Fund, delivers and receives payment for
securities sold, receives and pays for securities purchased, collects income
from investments, and performs other duties, all as directed by officers of the
Trust. [__________]
does
not exercise any supervisory function over management of the Fund, the purchase
and sale of securities, or the payment of distributions to
shareholders.
Foreside
Fund Services, LLC
(the “Distributor”) serves as the Distributor of Creation Units for the Fund on
an agency basis. The Distributor does not maintain a secondary market in
shares.
Practus,
LLP
serves as legal counsel to the Trust and the Fund.
[__________]
serves as the Fund’s independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Fund.
OTHER
INFORMATION
Continuous
Offering
The
method by which Creation Units of shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Units of
shares are issued and sold by the Fund on an ongoing basis, a “distribution,” as
such term is used in the Securities Act of 1933, as amended (the “Securities
Act”), may occur at any point. Broker-dealers and other persons are cautioned
that some activities on their part may, depending on the circumstances, result
in their being deemed participants in a distribution in a manner which could
render them statutory underwriters and subject them to the prospectus delivery
requirement and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent shares and sells the shares
directly to customers or if it chooses to couple the creation of a supply of new
shares with an active selling effort involving solicitation of secondary market
demand for shares. A determination of whether one is an underwriter for purposes
of the Securities Act must take into account all the facts and circumstances
pertaining to the activities of the broker-dealer or its client in the
particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares, whether or not participating in the distribution of
shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(3) of the Securities Act is not
available in respect of such transactions as a result of Section 24(d) of the
1940 Act. As a result, broker-dealer firms should note that dealers who are not
“underwriters” but are participating in a distribution (as contrasted with
engaging in ordinary secondary market transactions) and thus dealing with the
shares that are part of an overallotment within the meaning of Section 4(3)I of
the Securities Act, will be unable to take advantage of the prospectus delivery
exemption provided by Section 4(3) of the Securities Act. For delivery of
prospectuses to exchange members, the prospectus delivery mechanism of Rule 153
under the Securities Act is only available with respect to transactions on a
national exchange.
Dealers
effecting transactions in the shares, whether or not participating in this
distribution, are generally required to deliver a Prospectus. This is in
addition to any obligation of dealers to deliver a Prospectus when acting as
underwriters.
Premium/Discount
Information
When
available, information regarding how often the shares of the Fund traded on the
Exchange at a price above (i.e., at
a premium) or below (i.e., at
a discount) the NAV of the Fund will be available at
www.rexshares.com.
FINANCIAL
HIGHLIGHTS
Because
the Fund has not yet commenced operations as of the date hereof, no financial
highlights are available. In the future, financial highlights will be presented
in this section of the Prospectus.
FOR
MORE INFORMATION
You
will find more information about the Fund in the following
documents:
Statement
of Additional Information: For
more information about the Fund, you may wish to refer to the Fund’s SAI dated
____________, 2026, which is on file with the SEC and incorporated by reference
into this prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments, once available, will be available in
the Fund’s annual and semi-annual reports to shareholders and in Form N-CSR. In
the Fund’s annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund’s performance
during its last fiscal year. In Form N-CSR, you will find the Fund’s annual and
semi-annual financial statements.
You
can obtain a free copy of the SAI, annual and semi-annual reports, and other
information, such as the Fund’s financial statements, by writing to the Fund at
8730 Stony Point Parkway, Suite 205, Richmond, Virginia 23235, by calling the
Fund toll-free at (833)
759-6110,
by email at: [email protected]. The Fund’s annual and semi-annual reports,
prospectus and SAI are all available for viewing/downloading at
www.rexshares.com. General inquiries regarding the Fund may also be directed to
the above address or telephone number.
Copies
of these documents and other information about the Fund are available on the
EDGAR Database on the Commission’s Internet site at http://www.sec.gov, and
copies of these documents may also be obtained, after paying a duplication fee,
by electronic request at the following email address:
[email protected].
(Investment
Company Act File No. 811-23439)