A 50% drop in MSTR in a single day would theoretically wipe out the MSTU/MSTX 2x funds entirely, resulting in a 100% loss.

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Factchecked by Chatgpt:

  • Leveraged Funds (MSTU/MSTX) Mechanics:
    • These funds aim to deliver 2x the daily performance of MSTR (MicroStrategy). If MSTR drops 50% in one day, the 2x leveraged funds would theoretically drop 100%, wiping out their value for that day.
    • Leveraged funds reset daily, so extreme volatility can cause significant losses, even in cases of recovery later.
  • Total Loss for Investors:
    • A -100% loss means investors in these leveraged funds would lose their entire investment. This risk is inherent to leveraged ETFs in highly volatile stocks.
  • Assets Under Management (AUM):
    • ~10 billion AUM for leveraged funds linked to MSTR sounds exaggerated unless updated figures confirm this. MSTR itself, with an $80 billion market cap, suggests these funds are taking significant risk exposure.
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Yes, a 50% drop in MSTR in one day could wipe out MSTU/MSTX leveraged funds, resulting in a total loss for investors due to the high-risk nature of leveraged products. However, double-check the AUM numbers to confirm their accuracy.

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