GraniteShares has officially closed its 2x Long LCID Daily ETF, a fund that aimed to double the daily returns of Lucid Group's stock. Unfortunately, it lost an astonishing 92% of its value, illustrating the risks associated with leveraged investments. As of July 14, the fund's net asset value had plummeted to a negative $0.0156 while shares were trading at $0.2876.
The ETF, which launched on April 22, 2025, promised to capitalize on the movements of Lucid’s stock on the NASDAQ. However, the reality is that leveraged ETFs reset their performance on a daily basis. This means that while they can work well for short-term trading, they can lead to significant losses over extended periods due to a phenomenon known as "volatility decay". For example, if Lucid’s stock dropped by 10% one day but climbed back up by 10% the next, the leveraged fund would not return to its original value. Instead, it would incur losses, resulting in a 91% decline year-to-date.
GraniteShares is not alone in this trend. The company has also decided to liquidate several other leveraged ETFs, including BULX, ETRL, and MSDD, indicating a broader issue with single-stock leveraged products. The termination of LCDL serves as a cautionary tale for investors, especially given that financial advisors often warn against using these types of funds as long-term investments.
The negative net asset value of the ETF is particularly concerning. With a trading price of $0.2876 against a NAV of negative $0.0156, the market price has diverged significantly from the actual value of the underlying assets. This situation means that anyone purchasing at that market price was effectively buying into a fund that had lost its real worth.
This information is for educational purposes only and does not constitute financial advice.
