File this fact in the back of your mind for the next time someone shows you an investment model that, hypothetically, would have gained 600% during 2008. How? Well, hard to say. But the story’s reportage suggests wrong-way bets using leveraged exchange-traded funds, probably those tied to the CBOE Volatility Index (VIX). “It is not clear exactly what caused the big losses in August. Spruce Alpha used a sophisticated strategy that involved derivatives to amplify returns from trading in exchange-traded funds, or E.T.F.s, of various strategies. The strategy seeks to make money off the volatility in the stock market.” I fail to understand how people are...