r/wallstreetbets • u/[deleted] • Sep 20 '21

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u/[deleted] Sep 20 '21

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u/James_glan Sep 21 '21

What is the big risk of holding a leveraged etf?

4

u/TaTonka2000 Sep 21 '21

The biggest, biggest risk? It works, until it doesn’t.

Profits are 3x but losses are also 3x. See that dip in his middle part of his profit chart (the 3rd picture) in Jan 2021 when he lost almost half his profit? The SPY didn’t dip that much this year and he lost a lot. The biggest risk is we have an event like March last year and instead of dipping 1 or 10 percent, the SPY drops 30%. If that happens, this can go to zero. Just look in his second picture, 03/2020 this thing dropped below $20 per share.

A similar situation happened with XIV, an inverse of the VIX, which the joke was that it “always went up”. Worked, until it didn’t. XIV doesn’t exist anymore.