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What if S&P 500 lost 50% on a single day?

Tuesday, October 25, 2016 6:24
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Most of us know that there are leveraged ETFs, providing up to 3x daily exposure, in decimal percent. Usually these etfs  perform just as advertised, but imagine a situation where the index looses a very large portion (~50%). Such an event unlikely, but is not impossible if you think about the ‘fat tails’ and ~20% loss on black monday in 1987.
Now imagine you are unfortunate enough to own one of the 3X leveraged etfs on while S&P looses 50% of its value. will 3x exposure result in a 150% loss??? Ok, you probably will face a margin call before that, but I’m having a hard time trying to imagine what would happen to the leveraged etf price on such a day.
What do you think?


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