I read the answers from the following two posts describing why daily leveraged ETFs are a bad idea to hold in the long term:
Investing in a leveraged index ETF for retirement. Risky?
Why are daily rebalanced inverse/leveraged ETFs bad for long term investing?
I also get that, if you are investing in a 3x daily ETF tracking the S&P500, say, and that index drops by 33.3% in one day, you lose everything. As you get closer to that limit, the rebalancing costs on days of losses increase to the value of your entire portfolio at that extreme.
However, is it really realistic that such an index might drop by 33.3% in one day? (As an aside, what happens if it drops by more than that -- would the leveraged ETF's price go negative or just stay at 0?)
Furthermore, while the critics of long-term holding of leveraged ETFs are right to point out rebalancing costs, in practice the CAGR of a simulated 3x daily leveraged stock has been around 11.56% since 1993 (including both major recessions) whereas SPY has been around 7.31%. You don't get more long term than that.
So I get why you wouldn't want to invest your retirement portfolio in a 3x leveraged ETF, especially if your time horizon is short. However, if you have a certain amount of money that you could easily live without, and have a long time horizon, is keeping that money in a 3x leveraged ETF really that bad (or is it good)?
As a random interesting fact, at least in the above specified time frame, my simulations show that a 3x leverage yields the best returns out of all integer leverage multipliers (slightly more than 2x).