[pinkmuffinere]

+1, the criticism of “if s&p goes up and come back down, leveraged investments lose” is just insufficient as a criticism. It examines only one case. I’m probably 30% in SPUU for years now, and would like to hear real criticisms — do you have any real criticisms to share? I legitimately have found so little competent commentary on it, and I think I understand the risk I’m taking, but don’t want to miss an opportunity to get considered input.

[jcalvinowens]

> I’m probably 30% in SPUU for years now, and would like to hear real criticisms — do you have any real criticisms to share?

I'm no expert. But it seems like writing out of the money options: it's "free money" until the market suddenly moves against you, and you get your head chopped off. When that inevitably happens, the loss has a good chance of more than wiping out all your prior gains.

[pinkmuffinere]

Not to “fight“, but just to add to the conversation:

I agree it is taking on more risk, although potentially less than with out-of-the-money options. To lose 99% of spuu’s value the sp500 would have to drop 50% in one day, or 35% for three days in a row, or 20% for nine days in a row, etc with infinite similar cases. It’s not a rigorous argument, but I think those examples give a feel for how common/rare that occurrence would be — I think these particular cases have never happened since the sp500 started.

But it’s certainly riskier-than-traditional in either case

[arcticbull]

> To lose 99% of spuu’s value the sp500 would have to drop 50% in one day...

Which is exceedingly unlikely because of the circuit breakers. A level 3 breaker is triggered after a 20% decline and halts trading for the remainder of the day.

[pinkmuffinere]

Oh wow good point! The existence of breakers lurked in the back of my mind, but I didn’t realize the implication there. That is nice.

[arcticbull]

Not that a 60% 1-day decline would be welcome by many investors :P