I simulated TQQQ back to QQQ's 1999 launch

Many people here trade options on leveraged ETFs. I simulated TQQQ back to QQQ's inception in March 1999, with financing costs and the fund's expense ratio built into the model. Almost every leveraged ETF discussion eventually runs into assumption 3x daily leverage should produce something close to 3x the long-term return. The pre-2010 series models 3x daily exposure to QQQ, with financing costs on the borrowed notional and the fund's expense ratio subtracted daily. Starting in 2010, the simulated series is spliced directly into TQQQ's real, traded adjusted price history, so everything after that point comes from actual market data. **The results, $10,000 invested in March 1999:** * QQQ: $10,000 → $167,265 (11% annualized) * TQQQ (simulated pre-2010, real data after): $10,000 → $24,569 (3.4% annualized) **Maximum drawdown over the same 27 years:** * QQQ: -82.96% * TQQQ: -99.98% A -99.98% drawdown means every $10,000 at the peak fell to $2 at the bottom. TQQQ carried far more risk the entire way and still finished with $14,569 in total profit against QQQ's $157,265, under 10% of the unleveraged return. The volatility drag (beta slippage) scales with the square of the leverage multiple. Double the leverage and the drag roughly quadruples, triple it and the drag runs close to nine times larger. That is why I don't trade options on leveraged ETFs. You would be layering theta and IV risk on top of an instrument that is already decaying by design and has never been tested by the environment that would break it.