Read the LABU/LABD prospectus cover to cover last night. Similar math and graph as what @jeffcp66 posted yesterday. They very clearly state that if the index goes no where, the fund will lose money and they truly are for short term trading. However, unlike SVXY/XIV there is no mention that it can go to zero or be liquidated but in periods of extreme volatility it will fair worse than a non leveraged product because of the adjustments. However once the move occurs subsequent adjustments actually mute the effects a little.

For example on day 1 a 50% drop in the index would cause a 90% drop in NAV. Another 50% the next day that number would decrease to around 80%. Still a lot of pain but not as severe.

I think the way to trade these is sell premium, hedge/spread up front so risk is controlled, and any sudden moves get out quick. Don’t want to hold the ETF long term unless you have a strong directional bias.

Personally I will be adjusting these to spreads instead of naked #pietrades. That way can still collect the premiums but control worst case scenario. Don’t want another SVXY implosion in my accounts. However the spreads will be fairly wide 5-10 points so the premium collected is still excellent. For instance an 18 DTE LABU pcs at 87/82 is going for 0.6 credit with only 5k at risk. Much less cash than selling naked but also a huge reduction in risk! Perhaps a better way to trade them? 🙂