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Not to “fight“, but just to add to the conversation: I agree it is taking on more risk, although potentially less than with out-of-the-money options. To lose 9
by pinkmuffinere 2y ago
Not to “fight“, but just to add to the conversation:
I agree it is taking on more risk, although potentially less than with out-of-the-money options. To lose 99% of spuu’s value the sp500 would have to drop 50% in one day, or 35% for three days in a row, or 20% for nine days in a row, etc with infinite similar cases. It’s not a rigorous argument, but I think those examples give a feel for how common/rare that occurrence would be — I think these particular cases have never happened since the sp500 started.
But it’s certainly riskier-than-traditional in either case
- arcticbull 2y ago> To lose 99% of spuu’s value the sp500 would have to drop 50% in one day... Which is exceedingly unlikely because of the circuit breakers. A level 3 breaker is triggered after a 20% decline and halts trading for the remainder of the day.
- pinkmuffinere 2y agoOh wow good point! The existence of breakers lurked in the back of my mind, but I didn’t realize the implication there. That is nice.
- arcticbull 2y agoNot that a 60% 1-day decline would be welcome by many investors :P