Hey Bob – you're close. Get this, if MSTR does -50% in a day, then the MSTUMSTX 2x funds get wiped out. Completely. Everyone loses -100% of their money.
~10bn aum between the two leveraged funds on a stock with a 80bn market cap.
— lowstrife (@lowstrife) December 19, 2024
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.
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.
Related:
https://twitter.com/RevolveStudioUK/status/1869825800939409534
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