Should Investors Use Leveraged ETFs or Avoid Them Altogether?

The article warns that leveraged ETFs like ProShares UltraPro QQQ (TQQQ) can produce severe drawdowns, including -70% in 2020 and -81% in 2022, despite a 665% total return since 2020. It highlights higher costs as well, with TQQQ’s 0.82% expense ratio versus 0.18% for QQQ, and argues that volatility decay makes these products unsuitable for most buy-and-hold investors. The piece is more of a risk warning than a market-moving event.

Analysis

The bigger signal is not that leveraged ETFs exist, but that product issuance is now feeding retail demand for convexity at the exact point where market structure is least forgiving. Single-stock leverage concentrates flows into already crowded leaders, amplifying both upside and intraday reversals; that can mechanically boost realized volatility in names like NVDA and, by extension, the volatility-selling ecosystem around them. The second-order effect is that these products can become transient liquidity providers on the way up and forced sellers on the way down, worsening air pockets when the momentum regime breaks.

The risk/reward asymmetry is especially poor for buy-and-hold holders because the decay problem is not linear — it becomes most damaging in range-bound or mean-reverting tape, which is the most likely setup after a multi-month melt-up. That makes the near-term catalyst path more important than the directional call: if breadth narrows, rates stay sticky, or megacap earnings disappoint even modestly, leveraged retail flows can unwind over days to weeks and create outsized downside tails in the underlying leaders. In contrast, a strong trend can keep the product stable for longer than skeptics expect, so fighting it with outright shorts is dangerous without a catalyst window.

The contrarian miss is that the article frames leverage as merely a retail mistake, but structurally it is a sentiment indicator. Rapid growth in single-stock leverage usually marks late-cycle confidence and tends to precede higher dispersion between winners and laggards, not a clean top in the whole market. For NVDA, this supports a tactical long/vol overlay rather than a naked directional bet; for INTC, the leverage wave around AI leaders may actually widen the relative valuation gap by pulling speculative capital away from lagging turnaround stories. NFLX is mostly a bystander here, but if leverage is signaling a broader risk-on retail bid, it can benefit indirectly from multiple expansion even without direct thematic linkage.

Key Decisions for Investors

• Long NVDA vs short QQQ into the next 2-6 weeks as a dispersion trade: if retail leverage persists, the leader should outperform the index; stop if Nasdaq breadth broadens materially and momentum rotates into laggards.
• Buy NVDA downside protection for a 1-3 month horizon, financed with near-dated call overwrites: the setup favors higher realized vol and sharper drawdowns on any trend break, but you want to stay synthetically long the structural winner.
• Avoid naked short TQQQ or single-stock leveraged ETF products; if expressing a bearish view, use put spreads on the underlying index with 30-60 day tenor to cap the risk of another squeeze higher.
• Relative-value short INTC vs long NVDA over 1-3 months: the leverage boom reinforces capital concentration in perceived AI winners, and INTC remains a funding source rather than a beneficiary of that flow.
• If retail risk appetite fades, rotate into lower-volatility longs such as NFLX versus high-beta hardware; NFLX should hold up better on a factor basis even if the broader tape derates.