MicroStrategy ETFs Face Tracking Error Because Of Volatility: Here Are The Potential Risks Investors Face
Sharp deviations have been witnessed in the exchange-traded funds tracking Michael Saylor‘s MicroStrategy Inc. (NASDAQ:MSTR), likely stemming from the exposure to its volatile swaps and options.
What Happened: The T-Rex 2X Long MSTR Daily Target ETF (BATS:MSTU) launched on Sept. 18, 2024, and Defiance Daily Target 2x Long MSTR ETF (NASDAQ:MSTX) launched on Aug. 14, 2024, are the two U.S.-listed leveraged ETFs which aim to provide twice the daily returns of MicroStrategy.
However, these ETFs have shown significant tracking errors to their underlying asset, MicroStrategy, highlighting potential risks for investors.
- MSTU: On No. 21, MSTU declined 25.3%, 7% less than expected given MicroStrategy’s 16% drop. However, on Nov. 25, MSTU fell 11.3%, exceeding the expected 8.7% decline based on MicroStrategy’s 4.4% fall.
- MSTX: This fund also displayed tracking error, most notably on Nov. 25, when it plummeted 13.4%, 4.7% more than anticipated.
This underscores a potential for significant deviations in leveraged ETFs like MSTU and MSTX from their intended two times daily performance, …
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