How to Lose 50% in a Day on ETFs: Trade of the Century
19 Friday May 2017
Posted by Mish | May 19, 2017 5:32:08 | Economics
With options and futures, you can go broke and then some in minutes.
Thanks now to leveraged ETFs you can produce some amazing results in a day.
Pension Partners reports How to Lose 40% in a Day.
Losing 40% or more in a day was always possible using futures and options, but before June 2006 it was nearly impossible to do so using an exchange-traded fund (ETF). What happened in June 2006? The first leveraged ETFs were introduced.
Fast forward to yesterday and we witnessed the largest one-day decline in history for an ETF: -48.3%. The 3x long Brazil ETF (BRZU) now holds this ignominious distinction.
Thanks to leveraged ETFs, the 1987 crash has become child’s play. For a number of these ETFs, a 20% decline has become a non-event. The 3x long Gold Miners ETF (NUGT), for instance, has had 15 days in which it has declined 20% or more since its inception in late 2010. Its counterpart, the 3x short Gold Miners (DUST) bests this with 16 days with declines of at least 20%.
Before this week, the 3x short Financials ETF (FAZ) had held the record for largest one-day loss, at 45.1% (on March 23, 2009). The record stood for over 8 years. But records, as they say, are made to be broken.
Who will be the first to lose 50% in a single day? The casino is open – place your bets.
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