MicroStrategy ETFs Face Tracking Error Because Of Volatility: Here Are The Potential Risks Investors Face

Benzinga12-24 18:39

Sharp deviations have been witnessed in the exchange-traded funds tracking Michael Saylor‘s MicroStrategy Inc. MSTR, likely stemming from the exposure to its volatile swaps and options. What Happened:...

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MSTR, likely stemming from the exposure to its volatile swaps and options.\nWhat Happened:...</p>\n\n<a href=\"https://www.benzinga.com/24/12/42667093/microstrategy-etfs-face-tracking-error-because-of-volatility-here-are-the-potential-risks-investors-face\">Source Link</a>\n\n</div>\n","source":"Benzinga","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>MicroStrategy ETFs Face Tracking Error Because Of Volatility: Here Are The Potential Risks Investors Face</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicroStrategy ETFs Face Tracking Error Because Of Volatility: Here Are The Potential Risks Investors Face\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-24 18:39 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.benzinga.com/24/12/42667093/microstrategy-etfs-face-tracking-error-because-of-volatility-here-are-the-potential-risks-investors-face><strong>Benzinga</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Sharp deviations have been witnessed in the exchange-traded funds tracking Michael Saylor‘s MicroStrategy Inc. MSTR, likely stemming from the exposure to its volatile swaps and options.\nWhat Happened:...</p>\n\n<a href=\"https://www.benzinga.com/24/12/42667093/microstrategy-etfs-face-tracking-error-because-of-volatility-here-are-the-potential-risks-investors-face\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4211","symbol_name":"区域性银行","start_time":0,"source_url":"https://www.benzinga.com/24/12/42667093/microstrategy-etfs-face-tracking-error-because-of-volatility-here-are-the-potential-risks-investors-face","article_id":"2493701053","we_media_id":null,"thumbnails":["https://www.benzinga.com/files/images/story/2024/12/24/MicroStrategy-Inc-.jpeg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2493701053","pubTimestamp":1735036778,"columns":[],"sourceInfo":{"source_id":"Benzinga","name":"Benzinga Cypto"},"weMediaInfo":null,"summary":"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.","collect":0,"end_time":0,"defaultTopTitle":"benzinga.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4211":"区域性银行","BK4600":"加密货币概念","MSTX":"Defiance Daily Target 2X Long MSTR ETF","BK4023":"应用软件","ISBC":"投资者银行","MSTU":"T-Rex 2X Long MSTR Daily Target ETF","FDN":"First Trust Dow Jones Internet I","MSTR":"MicroStrategy","BK4585":"ETF&股票定投概念","BK4550":"红杉资本持仓","BK4588":"碎股","BK4596":"哈里斯概念","BK4516":"特朗普概念","BK4595":"比特币概念"},"translate_title":"MicroStrategy ETF因波动性而面临跟踪错误：以下是投资者面临的潜在风险","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ISBC":1,"MSTR":1,"MSTU":1,"MSTX":1,"FDN":0.9},"content_text":"Sharp deviations have been witnessed in the exchange-traded funds tracking Michael Saylor‘s MicroStrategy Inc. MSTR, likely stemming from the exposure to its volatile swaps and options.\nWhat Happened: The T-Rex 2X Long MSTR Daily Target ETF MSTU launched on Sept. 18, 2024, and Defiance Daily Target 2x Long MSTR ETF MSTX launched on Aug. 14, 2024, are the two U.S.-listed leveraged ETFs which aim to provide twice the daily returns of MicroStrategy.\nHowever, these ETFs have shown significant tracking errors to their underlying asset, MicroStrategy, highlighting potential risks for investors.\n\nMSTU: 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.\nMSTX: This fund also displayed tracking error, most notably on Nov. 25, when it plummeted 13.4%, 4.7% more than anticipated.\n\nThis underscores a potential for significant deviations in leveraged ETFs like MSTU and MSTX from their intended two times daily performance, presenting heightened risks for investors.\nSee Also: MicroStrategy Stock Declines Over 14% Amid Heightened Volatility Over S&P 500 Inclusion Concerns: Here’s What Is Happening\nWhy It Matters: MicroStrategy is the only publicly listed company holding the highest Bitcoin BTC/USD reserves, representing 2.1% of the total 21 million supply, at a cost of $27.1 billion. The company has also raised $20 billion of debt in 2024 to buy more.\nAccording to a report by Financial Times, Dave Mazza, the chief executive of Roundhill Investments says that the ETF tracking error is not an ETF or leveraged ETF problem, it is a MicroStrategy ETF problem. He said that these ETFs indirectly own (through saps and options) over 10% of MicroStrategy’s market cap, an unprecedented level for leveraged ETFs and a significant holding even among traditional ETFs.\n\"Simply put, MicroStrategy is too small a company to accommodate the AUM and trading volume in these products. At this point, these ETFs have already reached the breaking point,” Mazza told FT.\nAccording to Elisabeth Kashner, director of global fund analytics at FactSet, one solution to the tracking error is that these ETFs can stop the new unit creation and behave like a closed-end fund when swap lines are exhausted, however, this is discouraged by the Securities and Exchange Commission (SEC.)\nKashner told FT that T-Rex and Defiance, the firms that operate these ETFs face a suboptimal choice. “They can limit their growth or they can live with the limited accuracy and so far they have chosen to prioritise growth over accuracy,\" Kashner added.\nPrice Action: Shares of MicroStrategy were down over 1% in premarket trading on Tuesday. The stock has returned 385% on a year-to-date basis, compared to the Nasdaq Composite’s return of 33.85% in the same period, according to Benzinga Pro data.\nAbout 12 analysts tracked by Benzinga have a consensus ‘buy’ rating on the stock with a price target of $449.5 per share.\nThe three most recent analyst ratings between Bernstein, TD Cowen, and Barclays imply a 62% upside for MSTR.\n\nRead Next:\n\nMohammed El Erian Says This Country Faces Japan-Style Economic Risk Even As Tokyo Rebounds\n\nPhoto courtesy: Shutterstock Market News and Data brought to you by Benzinga APIs© 2024 Benzinga.com. Benzinga does not provide investment advice. 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