3 ms·
“ This strategy also greatly reduces the risk of ruin, as the S&P 500 would need to lose at least 1/3 of its total value in a single day for the fund to be wipe
by ridruejo 7y ago
“ This strategy also greatly reduces the risk of ruin, as the S&P 500 would need to lose at least 1/3 of its total value in a single day for the fund to be wiped out. Though certainly imaginable, this event is unlikely as the biggest single day loss in the history of the S&P 500 was Black Monday in 1987, in which around 20% of value evaporated from the S&P 500 in a single day.”
That didn’t age well (article is from last October)
- qeternity 7y agoHow? The recent losses were nothing compared to Black Monday, especially after a massive 2019.
- dmurray 7y agoIt dropped 12% on one day in March, not as big as the 20% on Black Monday but not "nothing". And the bull market of 2019 isn't really relevant when the article focuses on ETFs that leverage single-day moves.
- shmoogy 7y agoIt's almost impossible to happen, there are three circuit breakers, 7, 13, and 20%. After 20% the market closes for the rest of the day. I think it's only possible if the 20-33% drop happens at the very end of trading where the circuit breaker no longer can occur for the day.