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How to Lose 50% in a Day on ETFs: Trade of the Century

Courtesy of Mish

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.

One person commented they did not understand the point of my post How High Will Bitcoin Go?

It would have helped if I included the Twitter poll I meant to insert.

Trade of the Century

I was curious where people thought it was headed. So far, 67% think it will more than double from here. Not many readily buyable things go from well well under a penny to $1900.

As late as June 2012, you could have gotten Bitcoin for $7. I didn’t.

Blockchain Technology

For the record, blockchain technology will become widespread. It is perfect for recording things. Mortgages, deeds, titles, etc, are a perfect fit for starters.

Bitcoin itself is widely used as a capital light mechanism out of China. Outside of that, it is a mostly a speculative plaything.

Why not a triple-leveraged Bitcoin ETF? Perhaps Bitcoin could then eventually take out the above ETF records.

Mike “Mish” Shedlock

[Original article here.]


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