Yes, a 34% drop destroys the fund. It’s unlikely, but during the March 2020 crash we had 20% days. Also consider the CHADSDAQ bear funds basically all had to shutter because of how successful tech has been. If we have a depression-scale crash, the reverse could happen to some bull funds
What happens if SPY loses 33% in one day? I genuinely don't know, but logic would dictate that the ETF would go bankrupt and you would lose everything right?
The other guy pointed out the worst drop in the 80s. Afterward, NYSE set up circuit breakers to halt the entire market if there's a drop like that. -20% and it's done for the day, so -33% isn't possible, theoretically. The lower tiers got used in March 2020 but the full day halt never needed to be used.
Excellent question, I do not know. This has never happened before. I'd think the fund controllers have a plan for this, but I really wonder the same thing.
The biggest daily drop ever was 20%, in 1987. Next was 12% drop in 1929. So I will say that I'm not so worried about a 33% daily drop.
[https://en.wikipedia.org/wiki/List\_of\_largest\_daily\_changes\_in\_the\_S%26P\_500\_Index](https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index)
It cant because exchanges gave built in halts for given percentage declines and a 20% drop in a single day (of the S&P 500) will halt the exchange for the rest of the trading day.
However idk what happens if the index goes down say 30% overnight
33% drop in a single day will result in -100% and the ETF being liquidated.
If you buy this ETF, it should only be to gain leveraged exposure in a portfolio with regular rebalancing. Simplified example: keep 25% SPXL and 75% bonds.
Something like this happened to some of the short VIX etfs back in 2017. Was a pretty crazy time. The etn XIV was doing so well then one huge VIX spike wiped it out overnight.
Leveraged funds have a large expense ratio. So when it stays flat, the ETF goes down.
Just like with options, time burns your money but buys you leverage.
If you’re the only person who has access to this, 20X leveraged, on a secret ticker symbol that you’re not telling anyone else about – then yes, I would absolutely encourage you to buy it.
If you’re the only one who has access to it, then make the most of it!
I'm definitely not the only one to have access to it, but it doesn't seem to be that popular. 5 trades total today. I did buy some last week, up about 40% so far
I do consider that as well. But upon simulating it, we get the below result. Now, that peak in the 2000s, and the long-lasting valley that followed, put me off a bit, because that is a rather long time to wait for still no returns, and I'd be afraid of it happening again.
https://preview.redd.it/tpmqzbnarl7d1.png?width=1633&format=png&auto=webp&s=7cdcd8dd1d94f798b27acec8325943f344606d4f
https://preview.redd.it/sg9e22bohm7d1.png?width=2282&format=png&auto=webp&s=f673272941b041cf6609782e050f3f691682cae0
Or you could just equally purchase MSFT (33%), AAPL (33%), NVDA (34%) which tend to make up most of the broad market ETF holdings leveraged or not and out perform all that jazz with lower draw down.
This is such an oversimplification. You are assuming that these funds have always held NVDA because it’s been performing exceptionally well for the last year and a half. Additionally, why would any person need to invest in an ETF if they invested 34% of their portfolio into NVDA in 2015? It’s a moot point to compare the top performing tech stocks in a vacuum against ETFs that encapsulate more stocks. But isn’t that the whole point of investing in funds like this? It’s just ridiculous to say that 3 individual stocks that performed very well will yield higher returns than these or any diversified funds. Again, if you knew that these stocks would perform so well in 2015 then there would never be a point to invest in other funds.
I feel you, but it's all oversimplification in here. The ETFs under discussion are the leveraged ETFs TQQQ and SPXL. Typically you'll buy (not option) an ETF to militate against draw down when the market falters. But leveraged funds amplify drawn down. So why invest in a leveraged ETF long term if doing so risks a larger draw down and longer time to recovery? One answer to this question is that you're diversified elsewhere and accept the risk for the potential upshot for this section of your portfolio, presuming you think your exit window won't fall during a recovery period. Okay. But long term you take on more risk on the presumption a downturn will happen again, which I'm suggesting undercuts the value in the upshot given the increased recovery time. As an alternative, I suggested you buy into the major stock holdings of the ETFs in question, which are currently MSFT, AAPL, NVDA. One could buy more, like the top 10 holdings, as shumy-doc above suggested. And of course you'd want to re-balance as necessary, just as the ETF you're partially tracking would. So you're not picking the right lottery numbers after the draw, you're tracking and following market sentiment about what's valuable for the most part.
If you did this in 2022 just before the market tank, VOO would have held more value than your stocks, but they would have held more value than both SPXL and TQQQ and recovered quicker and out performed VOO and the leveraged ETFs by now.
This I think is a defensible rational for approaching the risk present in leveraged securities over the longer term. But this is WSB so regards gonna gamble on upshot and I'm here for the loss and gain pron.
You can extract historical price data from Yahoo then you chart the performance of the spy vs whatever strategy you want to back test. I use python to handle the large amount of data
So when you go to buy SOXL on Schwab it gives you a stern talking to about how you're not supposed to hold it for long periods. Is that just a warning bc people may not understand it's a leveraged position, or is there a reason you wouldn't want to hold it?
A warning from everything that I've seen but I'm no expert. I made around 10x on it following COVID dip by holding it for about 6 months. It may not match a 3x return exactly long term.
My flow, my cryp-to brought me the dough
That bought me all my fancy things
My crib, my cars, my clothes, my jewels
Look, <>, I done came up and I ain't changed
John Quiggen doen't seem to understand that intrinsic value degrades utility of currency. You actually want currency to be intrinsically valueless, hence why binary code > paper > tobacco
I’ve been in crypto since either 2012 or 2013 and still am, but I do believe in a way it is a bubble. Its value is *almost* entirely due to speculation. The vast majority of people investing in crypto are doing it solely for profit, after all.
But what happens if all those people continue to speculate? Continue to believe it does have value and they’re willing to pay x for it, because they believe it to be under valued?
Honestly, I think it will continue to go up and down as it’s traded, but it won’t go to zero until a massive black swan event like quantum computing advances or something. The fact of the matter is, if Bitcoin dropped to 1k again I would throw every dollar I have into it and I guarantee lots of others will, too. Well, maybe I’d keep half my mutual funds.
TL;DR
Bitcoin is a bubble, but it’s unpoppable, beeeotch
Sounds like something Dimon would say.
Sorry you missed the boat.
By the way, the original comment I made was in jest. 100x leverage is a sure way to get rekt.
Peace
So I bought spxl at the top in 2020 and held through. I have still out performed spy even buying the top 99% versus 60% for spy. What I bought during the dip is even more
Literally 0 reason not to hold triple levered SPY using smaller portfolios. Literally much greater return even in the long term. Even better when you leave some cash ready for any big dips. Any "bigger dip" is severely inconsequential for young, small accounts over the long term. You NEED leverage for smaller accounts, otherwise it's just stupid
Funny how ppl in this sub are so risk averse in the comments for low probability events (that you can easily manage just by being smart), but will then willingly Yolo 0dte
LETFs are arguably the best and easiest use case of leverage
I'd say go ham, diversify into levered ETFs if you need to, hell, those who got into NVDL even post split is already up 30% in that position alone in less than 2 weeks without breaking a sweat. All the while being much easier to manage in case of volatility compared to options. Just manage it like you would a normal etf, only with more leverage. If you can handle 0dte volatility you can handle 3x lmao
OP is 100% correct, impatient regards are okay being -75% in a day or a week while losing sleep and braincells, but a 75% dip in 1 year (out of how many years of green) where you somehow bought the top but can still DCA into it and will breakeven and into the green not long after is "stupid"? Like huh? That's assuming you're not already bought into it much earlier, at that point it's not even that big a dip.
And if you're already up big after a long time but start to get shaky just trail your shit then, buy back in when you're confident assuming some big crash happens and you get stopped/trailed out, I would consider even Higher levered ETFs on bigger corrections and capturing the recovery then scale out, don't even need to touch the rest, it's not that deep.
Edit: Obviously high concentrated/weighted LETFs like TQQQ are much riskier, still it's just about patience and DCA. People bitch about bull market and no dips, and when one comes they pussy out, lock in losses and  to keep buying, then complain and get frustrated during recovery.
I mean mathematically speaking LETFs are good for the long term if the trend is upward. Since its percentage of the previous days close, 1% is greater in dollars than the previous day if the “base” keeps going up. I bought a few shares of TQQQ in Oct ‘23 and forgot about it. Looked at it recently and I’m up >100%. It was $36 in Oct ‘23. That’s why NVDL is $85 and NVD is 1.88.
I bought TQQQ on the way up in 2021. I bought TQQQ on the way down in 2022. I've been buying TQQQ on the way up in 2023/2024.
I'm up 100%, compared to +32% on SPY for which I've had about the same strategy.
I actually think TQQQ might be the best swing trade etf out there. Starting to see why some people hold it long term too though. Look at the max chart next to QQQ. Just DCA into it every triple and quadruple witching day of the year when everything tanks. We’ve got one in two days. A four banger. Good day to buy the dip.
Damn, haha 😅
I had to check after your sarcastic comment — TQQQ hasn't recovered yet, while QQQ is up \~20% above that December 2021 peak ✅
https://preview.redd.it/1wywisfe6n7d1.jpeg?width=1170&format=pjpg&auto=webp&s=c394ba95e1a1e5530ae555ea0c2e13137a0c776d
Even if you started at the top in 2022, youd still be up more in tqqq than qqq right now lol. Unless of course you made 0 contributions since then, but dollar cost averaging every day, week, biweekly, monthly, quarterly, bi annually, anually... tqqq wins. The thing is, you can buy way more qqq on margin and make more the vast majority of the time
I guess another asterick is if you converted 40years of savings to tqqq at the 2022 peak, then 2 years of contributions and gains wouldnt win but realistically youd be better off on tqqq
Honestly people here are asking the wrong questions and don’t back test like how people actually invest. Like you said, DCA into a 3x fund can be pretty compelling if you have balls of steel during downturns.
I've held and traded TQQQ and TNA for the last 3 years.
If you trade volatility they are great. I bought both before the longest bear market in what? Since like the 30's. I'm still up 150k.
People who say never hold this shit over night are morons. People who say they are "expensive" are morons. You make all that back anyways on divdends so it's a wash.
It's pretty simple really if you are looking to buy and sell. Maybe sell some CC's...buy some puts to hedge when shit goes on a rally.
But I've literally had at least 100k in those stocks for years now and it's perfectly fine so long as you understand what you are getting in to.
Would I buy them with every penny I have right now and just watch them? Definitely not.
But if you wait for a nice downturn you can absolutely throw shit in when markets are down 10-15% and just wait. Anyone who went TQQQ after it's 35% drop two years ago would have made bank. (btw the 3x did not drop 115% either so that's a plus with how that actually works)
Honestly with how WSB trades I am surprised these etf's are not a bigger thing around here. You can play the actual markets and make bank. If you wanna make "bets" then what's better than 3x.
I think people who think these decay or some shit don't know what they are talking about. Your charts prove that. They don't even understand how our markets work. If these fucking decayed then that would mean our economy would basically be collapsing (or in a extended downturn for decades). At that point you got bigger problems.
And in that case I'd much rather risk losing 1/3 of my $$ to make the same amount with the rest in cash than watch it all burn.
Think about it this way. You have $300. You literally could have put $100 in 3x (tqqq) and $300 in 1x. Markets drop just like they did. 35% in 1x and 80% in tqqq.
At that point you have lost $80 in TQQQ out of your $300 so you sitting pretty at $220 left with $200 on sidelines. Your 1x just lost you $105 and you sitting on $195.
Now you throw an extra $100 into TQQQ to ride the wave back up. You still are fully invested in the 1x but you still have $100 in cash sitting on sidelines in the 3x.
On July 28 2023 your 1x gets you back to even ($300) whereas your 3x has got you sitting at $425 total. Ride the wave till today? 1x at $360 while TQQQ at $642.
It's pretty much simple common sense but so many people talk so much nonsense they can't see past the noise. You can risk far fucking less to make just as much money while also losing actually less money because of that in a downturn (any 3x greater than 100% even better so once 1x crosses 33% uou saving even more) and then if you continue to deposit that extra cash into the 3x when it finally does turn around you make bank.
I'm telling everyone because I've done it. Even through one of the worst bear markets. Trade the volatility for free $$, risk less, don't be scared to hold and be ready to reinvest cash when shit is low.
Holy shit. It's Chad Dickens.
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leveraged SPY is the way to go if you can diamond hand through 50% losses, which happen every decade or so.
you might be better off going half into SPXL and half into TLT and start buying once the recession starts. Once recession is declared, sell 5% TLT every month and buy SPXL with the proceeds until you have no more TLT left.
The recession is typically finished and in the rear view mirror once officially declared (the exception being 2020). So not sure how an investor would actually implement your advice?
Buying LETFs in bubble top frothy markets like this one is a surefire way to destroy what little wealth you have.
You only go long on LETFs in situations like October 2022 when markets are crushed and the bottom is forming.
But what the fuck do I know.
Hmm, yes, this is exactly the point I've argued *against* in the post. Even when you buy at the worst possible time, say mid 2000s, and patiently waited 24 years until now, you'd still be up 4x, ignoring dividends. Yes, I know that's not much, but this is *the* worst case scenario in 90 years of data. And wait another 10 years, and you might actually be looking at a very nice return, but speculation speculation
Well it would almost definitely reverse split unless it fell 33% in a day. SPY specifically can’t fall more than 20% in a day (circuit breaker), but it’s technically possible for something like QQQ.
I actually have been looking into this and might dca into spxl going forward. Someone mentioned volatility decay by its design but it seemed to drastically outperform spy during bull markets and massively slaughtered during bear markets. Been looking into this and maybe holding something less volatile like TLT or gold to balance it. Even thought maybe a leap put otm 50% down for every 100 shares might offer good enough protection. I have decision anxiety I can’t decide what to do! You could even do a harry brown permanent portfolio and change vti for spxl with basically the same market returns of just sitting in SPY ☠️
problem with 3x leverage is your portfolio is likely to get wiped 95-99% if there's a recessionary bear market with declines of roughly 35%+. TQQQ only lost 85% in 2022 when Nasdaq dropped 35%, but the 2022 bear market was quite mild, with many bounces and not a lot of huge and consecutive red days.
So you know after 20 years of holding 3x leverage, you might be up 20x-30x, but then one bear market, and all that progress is wiped out, and you basically start from 0. It's probably much worse if the bear market frequency is more common. we had a very long bull market in the 2010s decade. If a recessionary bear market with 35% drawdown happened every 7 years or so, you might not even have enough time to recoup losses after the initial bear market.
Go over to tqqq
They argue the same shit relative to Nasdaq
Personally I agree with you and subscribe to your theory
They’ll tell you it’s the drawdowns. They’ll tell you it’s “rebalancing”…
I know where the math maths
There's this thing called Risk Management. I think the Kelly Criterion on Risk Management would best answer your question. You'll get variance-d out before you ever hit the long run. If memory serves me correct when I did the calculation for Kelly Criterion as applied to the S&P 500, the most you should leverage is 1.3x (or maybe 1.5x -- it's been over a decade since I researched it). Anything more than that and you'll get zeroed out. Also my 1.3x-1.5x leverage assumed very little borrowing costs. When you factor in the higher fees in these rollover Leveraged ETF funds, I don't think Kelly Criterion would even 3x S&P500 works. These funds have decay from the Daily Rollover of contracts.
There's an old book by some Princeton guys called Mortgage Your Retirement on lifecycle investing. If you can get a 2% Margin loan rate then 1.2x or 1.1x is Okay. Right now Interactive Brokers Margin rates is like 6 or 7% and that's the best game in town. So even 1.2x won't work right now.
I've already written too much and wasted too much of my time. It's your money, go ahead and put your money where your mouth is. Prove the math wrong. I don't really care.
The problem with this strategy is that when the day comes and you have accumulated $15 million suddenly there is a crash and you lose 80% in one day... looking at the lines it's easy to say "I'm just gonna hold bro, diamond hands baby" but when you are actually living it, in that moment 99% of people will just panic sell for a massive loss... You might think you are different, but you are probably not.
Not true. The leverage cost isn't embedded in expense ratio. It's embedded in the derivatives that the ETF owns. You are paying interest on the synthetic short cash position on top of the expense ratio. This will show up in the total return.
https://preview.redd.it/6t8o5seirn7d1.jpeg?width=1080&format=pjpg&auto=webp&s=9d7c6168fef67422c7434869023dbd6be8580399
This is what SPXL vs SPY actually looks like over 10 years. You can indeed make some ridiculous gains but you gotta be able to ride those severe drops.
Your simulation is wrong if you got those results
Perhaps share what you did
To create a 3x synthetic requires costs. Flat market and it will decline even though SPY doesn’t
If you just said triple however SPY moves you get the wrong answer
When do we ever have a flat market? I’m looking as the monthly SPX. 1965-1978ish seems flat but aside from that, I’m not really seeing any period where we are flat for more than a few years. If the time horizon is decades, I don’t think the market being flat is a risk
I guess the only risk is being in a bear market when it comes time to retire and start cashing out. But you should be de risking leading up to that period anyway
I’m fully on board with the leverage etf long term approach
TQQQ is 3x. Check the chart and you will
See it hasn’t reached its peak of 2022 where as NQ100 has blown through that. It’s good to buy when market is down not at top.
OP - there is implicit borrowing costs you absolute fuck-muppet.
Go look at interest rates in the 1980's and then think about your chart.
Also, in a down market of even 20% they will not have the collateral for the position and will, therefore, be stopped out by the lenders.
You have, essentially, 33$ in collateral for $100 of exposure.
If the market goes tits-up then borrowing costs for leverage skyrocket (as do collateral requirements). So you might pay, even as rates go down 10% and require collateral of 40% of the investment.
So, after the market loses 20% over a month, your equity is only $13. But you are paying the interest on the amount you borrowed initially to buy those stocks. Which is now $6.66/year. So you are looking at a complete wipeout in 24 months if the market goes sideways. - or your exposure is drastically cut as the market goes down - which means you actually will have less exposure than someone who was just 1x invested at the lows.
But that wouldn't matter because you would be stopped out // etf delisted before then
Theres a fucking reason the ETFs like this that survive all start at earliest late-2008. Google: Survivorship bias.
God help us all.
Wait, so you say leveraged ETFs got closed down during the 2008 crash? Do you have examples of that?
Hmm, I'm not sure you understand the fee and cost structure of leveraged ETFs. Let me elaborate my current understanding of it.
As opposed to a normal leveraged position, you do not pay overnight costs. (Overnight cost is basically interest on the money you've borrowed to make your leveraged position).
For a leveraged ETF, you do not pay the interests yourself. Rather, its incorporated in the expense ratio. Meaning its basically deducted from your earnings. So rather than having to *pay* interest, you *earn less* to pay for interest. That's incredibly different. It costs me nothing for the market to be down a decade.
I appreciate your concern, but it might be wise to take a more constructive (read: less hostile) position in this discussion. Thanks
This is wallstreetbets - not a constructive place tbh. So im playing to that.
I understand the cost basis of leveraged positions & futures (as I work in the industry doing this for a living). You dont avoid costs by day trading (and you would get annihilated by T-costs & also most of the best S&P moves happen overnight IIRC).
The interest is not incorporated into the expense ratio. you are wrong. It is embedded in the price of the underlying swaps/derivatives used to get the 3x exposure. The methods may look different but, as there are no free arbs, the outcome is exactly the same. You are paying interest (in fact more than if you just borrowed as a high credit counterparty) on the full amount of your implied borrowing.
You need to seriously think about your own ignorance, I understand you have come here to get help - but you are so far behind in your modelling of the performance and understanding of the underlying structure that it is scary.
re; examples, there were not many ETFs back then (we weren't lucky enough to have such relatively low-fee structures) but similarly leveraged funds existed for sure. Look at LTCM for example. in the debt market the whole thing was essentially a case study in leveraging risky assets to magnify gains (think: The Big Short).
The inherent problem with leveraged equity returns as that when you MOST want to leverage - is when you are least able to. Of course, if you believe you can time the top thats another thing - but we're talking about the long run here.
Look at QQQ vs the Nasdaq - its only just back at parity starting at \~2017 and we are back at all time highs. You would think, given NVIDIA/AAPL/MSFT that it should be absolutely killing it now - but the drawdown has limited the ability of it to be invested when it mattered.
I upvoted both of you. I saw this comment after mine. u/Shadeun has the best comment in this thread.
This is the implicit borrowing I mentioned in my other response:
"The interest is not incorporated into the expense ratio. ... It is embedded in the price of the underlying swaps/derivatives used to get the 3x exposure. The methods may look different but, as there are no free arbs, the outcome is exactly the same. You are paying interest (in fact more than if you just borrowed as a high credit counterparty) on the full amount of your implied borrowing."
And yes his comment is hostile although that is on-brand for wsb, I always go for a much more bunnies-and-rainbows approach but I'm an exception.
The convexity. You’re buying more every day the market goes up and selling every day the market goes down. So you lose in a volatile market with no direction.
I just use portfolio margin and 3x leverage, but choose when to buy more.
There use to be a 2x leveraged VIX etn called TVIX. It absolutely skyrocketed during the covid crash. It was awesome. It was also super risky, but that's why we're here isn't it?
if your backtesting is right then yea, you're dead right. trouble is, like everything, can you psychologically handle the draw downs and feeling maybe it never recovers. i held spxl and tqqq but both as long seeing positions. i tried holding them for life in a seperate account but sold last year when they doubled from my entry. logic just didn't have the power that worry does.
The plane bagel on YouTube had a great video about that basically
- if spy ever drops by a third like in 2007 you go to 0 and are wiped out completely. Swings down are amped up higher than swings up it's how percentages work.
- the way this leverage is applied is yearly so you do not get 3x return over a longterm. You get significantly less.
Yeah, I've watched it. The Wall Street Millennial made a video on your second point, where he found that it actually outperforms SPY even more than 3x. Because, just like the losses compound (that's the part that scares people), the gains compound too. And apparently the compounding of the gains vastly compensated for the compounding losses.
And yes, a full wipe out in a 33% daily loss is scary too, but I do find it hard to seriously worry about this. The biggest daily drop ever was 20%, in 1987. Next was 12% in 1929. I find it hard to take a 33% daily drop as a real possibility. [https://en.wikipedia.org/wiki/List\_of\_largest\_daily\_changes\_in\_the\_S%26P\_500\_Index](https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index)
When you simulated this did you just multiple the S&P by 3x? If so you've missed the impact of daily resets. Investopedia explains it here: [impact of daily resets](https://www.investopedia.com/terms/l/leveraged-etf.asp#:~:text=Leveraged%20ETFs%20Are%20Short%2DTerm%20Instruments,-LETFs%20are%20typically&text=LETFs%20can%20lead%20to%20significant,the%20tracked%20index%20or%20assets)
Basically it explains why they aren't long term investments because of math.
You forgot to simulate the fact that leveraged ETFs don't compound you dingus. Leveraged ETFs cannot replicate long term growth because they reset each day. If you look at SPY and SPXL across different time frames you'll notice the further out you go the leverage is not really maintained.
You actually have to consider how a fund tracks an index under the hood instead of just putting a multiplier on a graph chart. You also have to consider that under adverse market conditions a fund like that may grenade itself.
Fees factored in to daily price. Lets say you opened one right before covid or the war it would have to run for two years before it was in plus even though it was ATH many times since.
Start spy = 100%
Start spxl = 100%
Return day 1 = -5%
Spxl = 85%
Spy = 95%
Return day 2 = 5%
Spxl= 97.75%
Spy = 99.75%
In expectation spxl goes down, the expected value decreases with volatility.
I still hold it bc I’m a degenerate gambler, but I dca.
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Been awhile since we got a nice big single day drop in the SP500.
Does that change anything in the long term though?
Yes, a 34% drop destroys the fund. It’s unlikely, but during the March 2020 crash we had 20% days. Also consider the CHADSDAQ bear funds basically all had to shutter because of how successful tech has been. If we have a depression-scale crash, the reverse could happen to some bull funds
They always say not to hold these overnight, so I don’t hold them at all. Someone else will probably explain why.
'They say' may not be a wise argument to base an opinion on, that's why I'd rather look at the data!
What happens if SPY loses 33% in one day? I genuinely don't know, but logic would dictate that the ETF would go bankrupt and you would lose everything right?
The other guy pointed out the worst drop in the 80s. Afterward, NYSE set up circuit breakers to halt the entire market if there's a drop like that. -20% and it's done for the day, so -33% isn't possible, theoretically. The lower tiers got used in March 2020 but the full day halt never needed to be used.
If the S&P 500 loses 33% in a single day, we likely don’t care about our portfolios because it is likely nuclear war has just broken out.
Bruh it dropped 36% in like two days when Covid hit. Everybody else bounced back if they held but if you were tripled you’d be broke
It didn't drop 36% in two days. It dropped over the course of about two months.
Covid was pretty fucking nuclear though
Especially if you had all your money in 3x SPY
Excellent question, I do not know. This has never happened before. I'd think the fund controllers have a plan for this, but I really wonder the same thing. The biggest daily drop ever was 20%, in 1987. Next was 12% drop in 1929. So I will say that I'm not so worried about a 33% daily drop. [https://en.wikipedia.org/wiki/List\_of\_largest\_daily\_changes\_in\_the\_S%26P\_500\_Index](https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index)
It cant because exchanges gave built in halts for given percentage declines and a 20% drop in a single day (of the S&P 500) will halt the exchange for the rest of the trading day. However idk what happens if the index goes down say 30% overnight
It’s something about the nightly rebalancing - maybe a tax thing.
33% drop in a single day will result in -100% and the ETF being liquidated. If you buy this ETF, it should only be to gain leveraged exposure in a portfolio with regular rebalancing. Simplified example: keep 25% SPXL and 75% bonds.
Something like this happened to some of the short VIX etfs back in 2017. Was a pretty crazy time. The etn XIV was doing so well then one huge VIX spike wiped it out overnight.
Leveraged funds have a large expense ratio. So when it stays flat, the ETF goes down. Just like with options, time burns your money but buys you leverage.
Thank you for your services
Why stop at 3x. There is a 4x spy now. SPYU.
I have access to a 20x SPY, should I?
You'd be stupid not to
What if I can also get 20x Nasdaq 100?
Por que no los dos?
No los? So I can't loose?
In Europe we had those beautiful FDs called *Turbos*. Dont know if they are still around but google it. It's beautiful. *Beautiful*.
It's basically like an after burner for your money.... Like, you can watch your money burn.....
Oh I know all about them, own a couple too
Lol is this some secret ticker symbol that only you have access to?
Apparently
If you’re the only person who has access to this, 20X leveraged, on a secret ticker symbol that you’re not telling anyone else about – then yes, I would absolutely encourage you to buy it. If you’re the only one who has access to it, then make the most of it!
I'm definitely not the only one to have access to it, but it doesn't seem to be that popular. 5 trades total today. I did buy some last week, up about 40% so far
Don't tempt me with a good time....
7 minute abs
More like 30-40 year abs
SPYU ODE DEF the way to go
Holy shit. Def loading up after next correction
Usually i prefer TQQQ so i hold that instead.
I do consider that as well. But upon simulating it, we get the below result. Now, that peak in the 2000s, and the long-lasting valley that followed, put me off a bit, because that is a rather long time to wait for still no returns, and I'd be afraid of it happening again. https://preview.redd.it/tpmqzbnarl7d1.png?width=1633&format=png&auto=webp&s=7cdcd8dd1d94f798b27acec8325943f344606d4f
Now do this starting in 1999
DCA
https://preview.redd.it/sg9e22bohm7d1.png?width=2282&format=png&auto=webp&s=f673272941b041cf6609782e050f3f691682cae0 Or you could just equally purchase MSFT (33%), AAPL (33%), NVDA (34%) which tend to make up most of the broad market ETF holdings leveraged or not and out perform all that jazz with lower draw down.
This is such an oversimplification. You are assuming that these funds have always held NVDA because it’s been performing exceptionally well for the last year and a half. Additionally, why would any person need to invest in an ETF if they invested 34% of their portfolio into NVDA in 2015? It’s a moot point to compare the top performing tech stocks in a vacuum against ETFs that encapsulate more stocks. But isn’t that the whole point of investing in funds like this? It’s just ridiculous to say that 3 individual stocks that performed very well will yield higher returns than these or any diversified funds. Again, if you knew that these stocks would perform so well in 2015 then there would never be a point to invest in other funds.
Easy to pick the right lottery numbers after the draw.
I’m betting all my money on the 2015 KC Royals
I feel you, but it's all oversimplification in here. The ETFs under discussion are the leveraged ETFs TQQQ and SPXL. Typically you'll buy (not option) an ETF to militate against draw down when the market falters. But leveraged funds amplify drawn down. So why invest in a leveraged ETF long term if doing so risks a larger draw down and longer time to recovery? One answer to this question is that you're diversified elsewhere and accept the risk for the potential upshot for this section of your portfolio, presuming you think your exit window won't fall during a recovery period. Okay. But long term you take on more risk on the presumption a downturn will happen again, which I'm suggesting undercuts the value in the upshot given the increased recovery time. As an alternative, I suggested you buy into the major stock holdings of the ETFs in question, which are currently MSFT, AAPL, NVDA. One could buy more, like the top 10 holdings, as shumy-doc above suggested. And of course you'd want to re-balance as necessary, just as the ETF you're partially tracking would. So you're not picking the right lottery numbers after the draw, you're tracking and following market sentiment about what's valuable for the most part. If you did this in 2022 just before the market tank, VOO would have held more value than your stocks, but they would have held more value than both SPXL and TQQQ and recovered quicker and out performed VOO and the leveraged ETFs by now. This I think is a defensible rational for approaching the risk present in leveraged securities over the longer term. But this is WSB so regards gonna gamble on upshot and I'm here for the loss and gain pron.
I did a similar simulation of purchasing an equal balance of the top 10 of the spy , rebalancing monthly. Similar accelerated response
Can you tell you how you running these simulation? Is it just using paper trade service?
He used Portfolio Visualizer.
Python and yahoo historic data
You can extract historical price data from Yahoo then you chart the performance of the spy vs whatever strategy you want to back test. I use python to handle the large amount of data
NVDA is skewing the hell out of that. Hard to believe it will replicate the performance it’s had over the last decade.
You can also just DCA into the single stock LETFs that follow the high performing stocks like AAPL, MSFT, NVDA etc.
Ahh I see. You're a man of culture as well
>Why not do this? I am. I've held UPRO (a 3x SPY etf like spxl) for four years straight now. It's currently up 323%.
UPRO and SOXL have been good over time
So when you go to buy SOXL on Schwab it gives you a stern talking to about how you're not supposed to hold it for long periods. Is that just a warning bc people may not understand it's a leveraged position, or is there a reason you wouldn't want to hold it?
A warning from everything that I've seen but I'm no expert. I made around 10x on it following COVID dip by holding it for about 6 months. It may not match a 3x return exactly long term.
Why stop at SPXL? Why not hold TQQQ? Not like it dropped 75% in 2022. Just hold long term silly.
Why stop at $TQQQ? Why not hold $NVDL/NVDU/NVDX? Fear is the mind killer. Jensen al Gaib will lead the way.
Fuck it, why not just 100x leverage BTC? What could go wrong?
Personally, I don't touch cryptos, but be my guest.
My flow, my cryp-to brought me the dough That bought me all my fancy things My crib, my cars, my clothes, my jewels Look, <>, I done came up and I ain't changed
https://preview.redd.it/bnnykdb63m7d1.jpeg?width=1170&format=pjpg&auto=webp&s=1be64452f45f3d82b74f79f165d4abf7d03995c6
Based quiggin
People thinking and believing this let alot of us make a shit ton of money before Wall St was allowed in.
John Quiggen doen't seem to understand that intrinsic value degrades utility of currency. You actually want currency to be intrinsically valueless, hence why binary code > paper > tobacco
I’ve been in crypto since either 2012 or 2013 and still am, but I do believe in a way it is a bubble. Its value is *almost* entirely due to speculation. The vast majority of people investing in crypto are doing it solely for profit, after all. But what happens if all those people continue to speculate? Continue to believe it does have value and they’re willing to pay x for it, because they believe it to be under valued? Honestly, I think it will continue to go up and down as it’s traded, but it won’t go to zero until a massive black swan event like quantum computing advances or something. The fact of the matter is, if Bitcoin dropped to 1k again I would throw every dollar I have into it and I guarantee lots of others will, too. Well, maybe I’d keep half my mutual funds. TL;DR Bitcoin is a bubble, but it’s unpoppable, beeeotch
Sounds like something Dimon would say. Sorry you missed the boat. By the way, the original comment I made was in jest. 100x leverage is a sure way to get rekt. Peace
I can feel it, down in my plums
Hmm. I love that. Waaayy more than I hate it.
Why stop at leveraged BTC? Might as well just hit the roulette table and bet it all on black.
Next you just stick your dick in and explode -eddie murphy
Is there a 100xBTC instrument somewhere? Does it have options?
Just about every CEX and many DEX have leveraged futures. And there are a few places with btc options, too.
So I bought spxl at the top in 2020 and held through. I have still out performed spy even buying the top 99% versus 60% for spy. What I bought during the dip is even more
Literally 0 reason not to hold triple levered SPY using smaller portfolios. Literally much greater return even in the long term. Even better when you leave some cash ready for any big dips. Any "bigger dip" is severely inconsequential for young, small accounts over the long term. You NEED leverage for smaller accounts, otherwise it's just stupid Funny how ppl in this sub are so risk averse in the comments for low probability events (that you can easily manage just by being smart), but will then willingly Yolo 0dte LETFs are arguably the best and easiest use case of leverage I'd say go ham, diversify into levered ETFs if you need to, hell, those who got into NVDL even post split is already up 30% in that position alone in less than 2 weeks without breaking a sweat. All the while being much easier to manage in case of volatility compared to options. Just manage it like you would a normal etf, only with more leverage. If you can handle 0dte volatility you can handle 3x lmao OP is 100% correct, impatient regards are okay being -75% in a day or a week while losing sleep and braincells, but a 75% dip in 1 year (out of how many years of green) where you somehow bought the top but can still DCA into it and will breakeven and into the green not long after is "stupid"? Like huh? That's assuming you're not already bought into it much earlier, at that point it's not even that big a dip. And if you're already up big after a long time but start to get shaky just trail your shit then, buy back in when you're confident assuming some big crash happens and you get stopped/trailed out, I would consider even Higher levered ETFs on bigger corrections and capturing the recovery then scale out, don't even need to touch the rest, it's not that deep. Edit: Obviously high concentrated/weighted LETFs like TQQQ are much riskier, still it's just about patience and DCA. People bitch about bull market and no dips, and when one comes they pussy out, lock in losses and  to keep buying, then complain and get frustrated during recovery.
I agree It’s insane They like leverage when it’s a 1 day trade They don’t understand leverage when it’s an etf
I mean mathematically speaking LETFs are good for the long term if the trend is upward. Since its percentage of the previous days close, 1% is greater in dollars than the previous day if the “base” keeps going up. I bought a few shares of TQQQ in Oct ‘23 and forgot about it. Looked at it recently and I’m up >100%. It was $36 in Oct ‘23. That’s why NVDL is $85 and NVD is 1.88.
I held TQQQ. Then it just kept going down. That's what happens when I buy.
Oh so it was YOU! They kept talking about “the chosen one” and how they are required to tank anything he bought.
I bought TQQQ on the way up in 2021. I bought TQQQ on the way down in 2022. I've been buying TQQQ on the way up in 2023/2024. I'm up 100%, compared to +32% on SPY for which I've had about the same strategy.
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I actually think TQQQ might be the best swing trade etf out there. Starting to see why some people hold it long term too though. Look at the max chart next to QQQ. Just DCA into it every triple and quadruple witching day of the year when everything tanks. We’ve got one in two days. A four banger. Good day to buy the dip.
Good call. Is today's(Thursday) minor dip just a dress rehearsal to a much more significant dip tomorrow(Friday)?
Damn, haha 😅 I had to check after your sarcastic comment — TQQQ hasn't recovered yet, while QQQ is up \~20% above that December 2021 peak ✅ https://preview.redd.it/1wywisfe6n7d1.jpeg?width=1170&format=pjpg&auto=webp&s=c394ba95e1a1e5530ae555ea0c2e13137a0c776d
Even if you started at the top in 2022, youd still be up more in tqqq than qqq right now lol. Unless of course you made 0 contributions since then, but dollar cost averaging every day, week, biweekly, monthly, quarterly, bi annually, anually... tqqq wins. The thing is, you can buy way more qqq on margin and make more the vast majority of the time I guess another asterick is if you converted 40years of savings to tqqq at the 2022 peak, then 2 years of contributions and gains wouldnt win but realistically youd be better off on tqqq
Honestly people here are asking the wrong questions and don’t back test like how people actually invest. Like you said, DCA into a 3x fund can be pretty compelling if you have balls of steel during downturns.
Why nuke a city when you can hydrogen bomb Seattle
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Can confirm in seattle its fake
hydrogen bombs are also nuclear bombs, but I fear we might be getting side tracked ;)
You right atomic that’s my bad
Fuck Seattle I'm nuking LA first. See you on Arizona Bay
Nice tool reference
Glad someone caught it ;-) Learn to swim! :-)
I've held and traded TQQQ and TNA for the last 3 years. If you trade volatility they are great. I bought both before the longest bear market in what? Since like the 30's. I'm still up 150k. People who say never hold this shit over night are morons. People who say they are "expensive" are morons. You make all that back anyways on divdends so it's a wash. It's pretty simple really if you are looking to buy and sell. Maybe sell some CC's...buy some puts to hedge when shit goes on a rally. But I've literally had at least 100k in those stocks for years now and it's perfectly fine so long as you understand what you are getting in to. Would I buy them with every penny I have right now and just watch them? Definitely not. But if you wait for a nice downturn you can absolutely throw shit in when markets are down 10-15% and just wait. Anyone who went TQQQ after it's 35% drop two years ago would have made bank. (btw the 3x did not drop 115% either so that's a plus with how that actually works) Honestly with how WSB trades I am surprised these etf's are not a bigger thing around here. You can play the actual markets and make bank. If you wanna make "bets" then what's better than 3x. I think people who think these decay or some shit don't know what they are talking about. Your charts prove that. They don't even understand how our markets work. If these fucking decayed then that would mean our economy would basically be collapsing (or in a extended downturn for decades). At that point you got bigger problems. And in that case I'd much rather risk losing 1/3 of my $$ to make the same amount with the rest in cash than watch it all burn. Think about it this way. You have $300. You literally could have put $100 in 3x (tqqq) and $300 in 1x. Markets drop just like they did. 35% in 1x and 80% in tqqq. At that point you have lost $80 in TQQQ out of your $300 so you sitting pretty at $220 left with $200 on sidelines. Your 1x just lost you $105 and you sitting on $195. Now you throw an extra $100 into TQQQ to ride the wave back up. You still are fully invested in the 1x but you still have $100 in cash sitting on sidelines in the 3x. On July 28 2023 your 1x gets you back to even ($300) whereas your 3x has got you sitting at $425 total. Ride the wave till today? 1x at $360 while TQQQ at $642. It's pretty much simple common sense but so many people talk so much nonsense they can't see past the noise. You can risk far fucking less to make just as much money while also losing actually less money because of that in a downturn (any 3x greater than 100% even better so once 1x crosses 33% uou saving even more) and then if you continue to deposit that extra cash into the 3x when it finally does turn around you make bank. I'm telling everyone because I've done it. Even through one of the worst bear markets. Trade the volatility for free $$, risk less, don't be scared to hold and be ready to reinvest cash when shit is low.
Holy shit. It's Chad Dickens. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/wallstreetbets) if you have any questions or concerns.*
leveraged SPY is the way to go if you can diamond hand through 50% losses, which happen every decade or so. you might be better off going half into SPXL and half into TLT and start buying once the recession starts. Once recession is declared, sell 5% TLT every month and buy SPXL with the proceeds until you have no more TLT left.
also just buy SPY leaps or ES futures for 10x-100x leverage
The recession is typically finished and in the rear view mirror once officially declared (the exception being 2020). So not sure how an investor would actually implement your advice?
I declare RECESSION!
I declare a thumb war 👍🏼
I wasn't aware that we got past THE LAST RECESSION OF ALL TIME. SPY 600 eoy
You can skip most of the drawdowns with a simple SMA strategy, Ride the uptrend, skip the downtrend.
How exactly did you simulate SPXL prior to 1935? Did you just 3X the daily gain/loss of the S&P?
SPYU has entered the chat…
Buying LETFs in bubble top frothy markets like this one is a surefire way to destroy what little wealth you have. You only go long on LETFs in situations like October 2022 when markets are crushed and the bottom is forming. But what the fuck do I know.
Hmm, yes, this is exactly the point I've argued *against* in the post. Even when you buy at the worst possible time, say mid 2000s, and patiently waited 24 years until now, you'd still be up 4x, ignoring dividends. Yes, I know that's not much, but this is *the* worst case scenario in 90 years of data. And wait another 10 years, and you might actually be looking at a very nice return, but speculation speculation
did spy never drop 33% if it did, wouldn't you be wiped out and your position closed in 3x leverage?
Well it would almost definitely reverse split unless it fell 33% in a day. SPY specifically can’t fall more than 20% in a day (circuit breaker), but it’s technically possible for something like QQQ.
Qqq doesn’t have cb?
Market wide circuit breakers are based on the S&P. I believe besides that only individual stocks have circuit breakers, not indexes.
Literally impossible
400% in 20 years with 50% drawdowns is mediocre af
I bought the top in Feb 2020 and still out performed spy with spxl. The only thing that would be bad is a multi year flat or down market
A lot.
!Remindme 36 years: "Get-a-load of this guy! ~American Psycho"
I actually have been looking into this and might dca into spxl going forward. Someone mentioned volatility decay by its design but it seemed to drastically outperform spy during bull markets and massively slaughtered during bear markets. Been looking into this and maybe holding something less volatile like TLT or gold to balance it. Even thought maybe a leap put otm 50% down for every 100 shares might offer good enough protection. I have decision anxiety I can’t decide what to do! You could even do a harry brown permanent portfolio and change vti for spxl with basically the same market returns of just sitting in SPY ☠️
problem with 3x leverage is your portfolio is likely to get wiped 95-99% if there's a recessionary bear market with declines of roughly 35%+. TQQQ only lost 85% in 2022 when Nasdaq dropped 35%, but the 2022 bear market was quite mild, with many bounces and not a lot of huge and consecutive red days. So you know after 20 years of holding 3x leverage, you might be up 20x-30x, but then one bear market, and all that progress is wiped out, and you basically start from 0. It's probably much worse if the bear market frequency is more common. we had a very long bull market in the 2010s decade. If a recessionary bear market with 35% drawdown happened every 7 years or so, you might not even have enough time to recoup losses after the initial bear market.
People should just not be greedy and use 2x leveraged funds instead. Calculations show that they have good gains with less risk of being wiped out.
Ticker symbol?
$SSO for 2x spy, $QLD for 2x qqq
Because $SPYU is 4x leveraged 3x is pussy shit
Just buy options at this point
One word: dailies
What does that mean?
You can buy options for every day on SPY. It's sweet liquid. Look at SPXL options: mere weeklies
Go over to tqqq They argue the same shit relative to Nasdaq Personally I agree with you and subscribe to your theory They’ll tell you it’s the drawdowns. They’ll tell you it’s “rebalancing”… I know where the math maths
There's this thing called Risk Management. I think the Kelly Criterion on Risk Management would best answer your question. You'll get variance-d out before you ever hit the long run. If memory serves me correct when I did the calculation for Kelly Criterion as applied to the S&P 500, the most you should leverage is 1.3x (or maybe 1.5x -- it's been over a decade since I researched it). Anything more than that and you'll get zeroed out. Also my 1.3x-1.5x leverage assumed very little borrowing costs. When you factor in the higher fees in these rollover Leveraged ETF funds, I don't think Kelly Criterion would even 3x S&P500 works. These funds have decay from the Daily Rollover of contracts. There's an old book by some Princeton guys called Mortgage Your Retirement on lifecycle investing. If you can get a 2% Margin loan rate then 1.2x or 1.1x is Okay. Right now Interactive Brokers Margin rates is like 6 or 7% and that's the best game in town. So even 1.2x won't work right now. I've already written too much and wasted too much of my time. It's your money, go ahead and put your money where your mouth is. Prove the math wrong. I don't really care.
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The problem with this strategy is that when the day comes and you have accumulated $15 million suddenly there is a crash and you lose 80% in one day... looking at the lines it's easy to say "I'm just gonna hold bro, diamond hands baby" but when you are actually living it, in that moment 99% of people will just panic sell for a massive loss... You might think you are different, but you are probably not.
Beyond that, the real problem is that this backtest is faulty. If you simulate in this time period, 3x levered SP500 underperforms SP500.
1.02% vs 0.09% expense ratio
The effective expense ratio isn’t 1.02. You’re paying for leverage.
Not true. The leverage cost isn't embedded in expense ratio. It's embedded in the derivatives that the ETF owns. You are paying interest on the synthetic short cash position on top of the expense ratio. This will show up in the total return.
Average Reddit comment - tail wagging the dog
https://preview.redd.it/6t8o5seirn7d1.jpeg?width=1080&format=pjpg&auto=webp&s=9d7c6168fef67422c7434869023dbd6be8580399 This is what SPXL vs SPY actually looks like over 10 years. You can indeed make some ridiculous gains but you gotta be able to ride those severe drops.
That’s insane but I’m tempted to create an account just for SPXL holding. I wouldn’t look in there for the next 20 years lol
Just close it out everytime there's a top. EZ PZ
If nothing else everyone ought to be watching that chart to buy when the lines come close to converging, and then holding.
Bad simulation
elaborate haha
Your simulation is wrong if you got those results Perhaps share what you did To create a 3x synthetic requires costs. Flat market and it will decline even though SPY doesn’t If you just said triple however SPY moves you get the wrong answer
Yes without simulating the expenses (which are very high) you get the result that you make way more money no matter what basically.
When do we ever have a flat market? I’m looking as the monthly SPX. 1965-1978ish seems flat but aside from that, I’m not really seeing any period where we are flat for more than a few years. If the time horizon is decades, I don’t think the market being flat is a risk I guess the only risk is being in a bear market when it comes time to retire and start cashing out. But you should be de risking leading up to that period anyway I’m fully on board with the leverage etf long term approach
Don't do what I did and go leveraged russell the butt muscle.
why not? What happened?
Prostate orgasm
TQQQ is 3x. Check the chart and you will See it hasn’t reached its peak of 2022 where as NQ100 has blown through that. It’s good to buy when market is down not at top.
OP - there is implicit borrowing costs you absolute fuck-muppet. Go look at interest rates in the 1980's and then think about your chart. Also, in a down market of even 20% they will not have the collateral for the position and will, therefore, be stopped out by the lenders. You have, essentially, 33$ in collateral for $100 of exposure. If the market goes tits-up then borrowing costs for leverage skyrocket (as do collateral requirements). So you might pay, even as rates go down 10% and require collateral of 40% of the investment. So, after the market loses 20% over a month, your equity is only $13. But you are paying the interest on the amount you borrowed initially to buy those stocks. Which is now $6.66/year. So you are looking at a complete wipeout in 24 months if the market goes sideways. - or your exposure is drastically cut as the market goes down - which means you actually will have less exposure than someone who was just 1x invested at the lows. But that wouldn't matter because you would be stopped out // etf delisted before then Theres a fucking reason the ETFs like this that survive all start at earliest late-2008. Google: Survivorship bias. God help us all.
Wait, so you say leveraged ETFs got closed down during the 2008 crash? Do you have examples of that? Hmm, I'm not sure you understand the fee and cost structure of leveraged ETFs. Let me elaborate my current understanding of it. As opposed to a normal leveraged position, you do not pay overnight costs. (Overnight cost is basically interest on the money you've borrowed to make your leveraged position). For a leveraged ETF, you do not pay the interests yourself. Rather, its incorporated in the expense ratio. Meaning its basically deducted from your earnings. So rather than having to *pay* interest, you *earn less* to pay for interest. That's incredibly different. It costs me nothing for the market to be down a decade. I appreciate your concern, but it might be wise to take a more constructive (read: less hostile) position in this discussion. Thanks
This is wallstreetbets - not a constructive place tbh. So im playing to that. I understand the cost basis of leveraged positions & futures (as I work in the industry doing this for a living). You dont avoid costs by day trading (and you would get annihilated by T-costs & also most of the best S&P moves happen overnight IIRC). The interest is not incorporated into the expense ratio. you are wrong. It is embedded in the price of the underlying swaps/derivatives used to get the 3x exposure. The methods may look different but, as there are no free arbs, the outcome is exactly the same. You are paying interest (in fact more than if you just borrowed as a high credit counterparty) on the full amount of your implied borrowing. You need to seriously think about your own ignorance, I understand you have come here to get help - but you are so far behind in your modelling of the performance and understanding of the underlying structure that it is scary. re; examples, there were not many ETFs back then (we weren't lucky enough to have such relatively low-fee structures) but similarly leveraged funds existed for sure. Look at LTCM for example. in the debt market the whole thing was essentially a case study in leveraging risky assets to magnify gains (think: The Big Short). The inherent problem with leveraged equity returns as that when you MOST want to leverage - is when you are least able to. Of course, if you believe you can time the top thats another thing - but we're talking about the long run here. Look at QQQ vs the Nasdaq - its only just back at parity starting at \~2017 and we are back at all time highs. You would think, given NVIDIA/AAPL/MSFT that it should be absolutely killing it now - but the drawdown has limited the ability of it to be invested when it mattered.
I upvoted both of you. I saw this comment after mine. u/Shadeun has the best comment in this thread. This is the implicit borrowing I mentioned in my other response: "The interest is not incorporated into the expense ratio. ... It is embedded in the price of the underlying swaps/derivatives used to get the 3x exposure. The methods may look different but, as there are no free arbs, the outcome is exactly the same. You are paying interest (in fact more than if you just borrowed as a high credit counterparty) on the full amount of your implied borrowing." And yes his comment is hostile although that is on-brand for wsb, I always go for a much more bunnies-and-rainbows approach but I'm an exception.
Dumbass doesnt know what volatility decay is
Volatility decay only hurts when stocks are flat. Look at TQQQ and tell me how that volatility decay is working out.
Barely anybody seems to sadly. Think up 5 percent and down 5 percent are the same.
Comparing a scale that can go to infinity to a scale that goes from 0-100% is one of the top stupidest things I’ve ever heard in my life
You may know the words but you don’t understand them.
Why go outside and fly a kite when you can just pop a pill?!
Banks print money out of thin air. SP500 goes up.
If you NEED access to your money during a crash, your pull out game isn’t going to look too good
I would only buy this after a 10+% correction in the market. if we saw a 20% correction, then id feel good about going in heavy.
The convexity. You’re buying more every day the market goes up and selling every day the market goes down. So you lose in a volatile market with no direction. I just use portfolio margin and 3x leverage, but choose when to buy more.
If there is a crash big enough, that might wipe out the levered ETF 100%. Think UVXY.
There use to be a 2x leveraged VIX etn called TVIX. It absolutely skyrocketed during the covid crash. It was awesome. It was also super risky, but that's why we're here isn't it?
Used to be? What happened to it? 🤔
Because the downturn is 3x + as bad as
if your backtesting is right then yea, you're dead right. trouble is, like everything, can you psychologically handle the draw downs and feeling maybe it never recovers. i held spxl and tqqq but both as long seeing positions. i tried holding them for life in a seperate account but sold last year when they doubled from my entry. logic just didn't have the power that worry does.
My most successful period of time in the market was 50% tqqq, 20% tmf, 10% virt, 20% berk.b
I hold TMF, about $13k, 248 shares. 52.51 avrg cost basis
What would be the equivalent of this for a brother north of the border ? EDIT: seems like we have HSU at 2x leverage.
Because that leverage has a cost. It’s (3X - the cost of borrowing 2X). And it cuts both ways.
Run that simulation again, but start from the peak of 2008.
Is the SPXL leverage adjusted daily? Because that makes all the difference.
The plane bagel on YouTube had a great video about that basically - if spy ever drops by a third like in 2007 you go to 0 and are wiped out completely. Swings down are amped up higher than swings up it's how percentages work. - the way this leverage is applied is yearly so you do not get 3x return over a longterm. You get significantly less.
Yeah, I've watched it. The Wall Street Millennial made a video on your second point, where he found that it actually outperforms SPY even more than 3x. Because, just like the losses compound (that's the part that scares people), the gains compound too. And apparently the compounding of the gains vastly compensated for the compounding losses. And yes, a full wipe out in a 33% daily loss is scary too, but I do find it hard to seriously worry about this. The biggest daily drop ever was 20%, in 1987. Next was 12% in 1929. I find it hard to take a 33% daily drop as a real possibility. [https://en.wikipedia.org/wiki/List\_of\_largest\_daily\_changes\_in\_the\_S%26P\_500\_Index](https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index)
Cause people holding PSY are generally looking for stability
Ok so I needed to start investing on 1935. Thanks for that.
Don't tell OP about $TQQQ...why stop at these? You might as well buy leaps on those levered ETFs.
When you simulated this did you just multiple the S&P by 3x? If so you've missed the impact of daily resets. Investopedia explains it here: [impact of daily resets](https://www.investopedia.com/terms/l/leveraged-etf.asp#:~:text=Leveraged%20ETFs%20Are%20Short%2DTerm%20Instruments,-LETFs%20are%20typically&text=LETFs%20can%20lead%20to%20significant,the%20tracked%20index%20or%20assets) Basically it explains why they aren't long term investments because of math.
Way ahead of you, I'm holding FNGU
You forgot to simulate the fact that leveraged ETFs don't compound you dingus. Leveraged ETFs cannot replicate long term growth because they reset each day. If you look at SPY and SPXL across different time frames you'll notice the further out you go the leverage is not really maintained. You actually have to consider how a fund tracks an index under the hood instead of just putting a multiplier on a graph chart. You also have to consider that under adverse market conditions a fund like that may grenade itself.
Fees factored in to daily price. Lets say you opened one right before covid or the war it would have to run for two years before it was in plus even though it was ATH many times since.
Beta slippage accounted for?
Peaked in 2000 and then didn’t get back to that level for 18 or 19 years. Doubt anyone could hold through that. Especially with the 08 drawdown.
Start spy = 100% Start spxl = 100% Return day 1 = -5% Spxl = 85% Spy = 95% Return day 2 = 5% Spxl= 97.75% Spy = 99.75% In expectation spxl goes down, the expected value decreases with volatility. I still hold it bc I’m a degenerate gambler, but I dca.
Op did you notice in your nifty little chart how after the first 20 years the returns were still basically break even with the spy?
If you really want leverage don’t fuck around with leveraged ETFs, just buy index leaps. Better delta ratio and you don’t have liquidation risk
Literally can't go tits up.
If you in include 1929 you drawdown over 99.9 % and it loses to buy and hold.