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Since TQQQ is 3x the leverage of QQQ, so the conventional wisdom is:

  1. When TQQQ drops 34%, then it is all "wiped out" (meaning a $100 investment will go to $0 now). And TQQQ itself is also all wiped out.

However, let's say, I bought TQQQ when QQQ was at $217, and now QQQ is at $330.

So let's say, if some day, QQQ drops from $330 to $217, which is dropping 34%, should my investment in TQQQ get all wiped out? However, I can also claim that, QQQ went up and then down along that roller coaster, but my TQQQ should just go to my original purchase price.

  1. Or making it more drastic: I bought TQQQ on Monday, and Tuesday, QQQ went up from $217 to $330, and Wednesday, QQQ went from $330 to $217 -- dropping 34%, then my TQQQ should go back to the price of Monday only.

However, if Tom bought TQQQ on Tuesday when QQQ was $330, and then Wednesday, QQQ went from $330 to $217, then by (1) above, shouldn't the invest in TQQQ get all wiped out? (and shouldn't TQQQ itself be completely wiped out?)

Or what if on Tuesday, when QQQ is $330, I sold all my TQQQ and get $N, and use that $N to buy back TQQQ (that is like, as if I did nothing really), but then by (1) above and like Tom, my investment in TQQQ should be wiped out, but by (2) above, my investment in TQQQ should just go back to the price I bought on Monday. So these two points are contradictory. How does it work?

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  • @nanoman I think the Q and A there really do not say anything about my question
    – nonopolarity
    Feb 7, 2021 at 17:26
  • It's a pretty exact match for your title question, and it says yes, a 3x ETF is wiped out if the underlying drops >33% in a single day. So your scenario #1 is correct (assuming you meant "QQQ drops 34%" and #2 is incorrect. There are many other questions here that explain daily rebalancing. There is no reason that when QQQ returns to the same price, TQQQ should return to the same price, unless it's on the same day.
    – nanoman
    Feb 7, 2021 at 17:39
  • @nanoman if it is what I do in my own account, by using x2 leverage, then I think it is true if QQQ doubles and then drops 50%, I am just back to original. So I think the key is about the "rebalancing" which the other question with similar title didn't touch
    – nonopolarity
    Feb 7, 2021 at 17:55
  • @nanoman the rebalancing answer does not directly answer the question, and does not give a good, clear, and simple answer as to what happens really. Does somebody on this forum has OCD and has to close question to achieve their daily goal?
    – nonopolarity
    Feb 7, 2021 at 20:06
  • I vote to close reluctantly. Selfishly I'd rather answer and earn rep. :)
    – nanoman
    Feb 7, 2021 at 20:27

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