Hacker News Reader

Because of the triple leverage, a 33.33% drop would entirely wipe out the fund. Back to $0. A 33% drop in a single day has never happened (1987 Black Monday was 22%) but it definitely does happen if you consider a longer time frame.

Hence why it's reset daily, as the other two responses explain.

And in case it's not been made clear enough: it's the very opposite of a sound investment. It's very much a risk management / trading instrument. It's something you would trade as a hedge or leg of a complex trade; not something you want to hold by itself.

The leveraged funds like TQQQ reset their leverage on a daily basis.

the leverage amounts typically "reset" daily (not always; read the prospectus) so if you lose 10% (say $100 => $80) at 2x your day 2 base is $80; a 10% gain that day would average out to 0 on net but you would gain 20% of $80 => $96