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| As a longtime MSTR supporter and believer that held MSTR before the MSTR 2x long funds came out I would advise anyone against using it who asked me about it. Caveat when MSTR goes into "up only mode" it will be the best thing ever but good luck predicting that.
Its meant to be a short term trading product. The longer you hold the worse the odds get. Using call options for leverage makes more sense usually (still risky). Leveraged ETFs suffer from "autocorrelation decay"/tracking decay.
So the 2x ETF is supposed to double those moves. The first day if you have $10,000 to start and the ETF goes down 50% than goes back up 50% the the next day you end up with $7,500. If you held the stock you would still have $9,375. Because you would have been down 25% than up 25%. The stock can recover much easier from this choppiness because people are trading based on its own perceived value and the market gets it back up to where it "should" be but the leveraged ETF just continues to decay in a choppy market.
Day 1 -50% $10,000x.5 =$5,000
Day 2 +50% $5000x1.5=$7500
Now imagine these most volatile large cap stock in the world MSTR over hundreds of trading days. Good chance you will get cut to pieces over a long time horizon potentially even if MSTR preforms well.
This holds true for all leveraged ETF products not just MSTR. The one that I have seen work the best is TQQQ a 3x levered Nasdaq product. It has out preformed the Nasdaq over multi year time periods and I believe since its inception but don't quote me on it. The reason it works so well is it uses high leverage on a tracker that has less volititly than single stocks like Tesla or MSTR so the leverage still works in a up trend and it mostly avoids the large downside days that typically destroy these single stock tracker ETFS. I would not use any of these products on single stocks. If I invested in indexes TQQQ would be interesting for me to look at but still risky.... | |
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Microstrategy 2x (mstu)
