In 2025, leveraged single-stock ETFs have surged in popularity, with 177 new ETFs launched in the first week of November, bringing the total to around 300, including complex option strategies.

Investors who bought into leveraged single-stock ETFs, like MicroStrategy (MSTR), expecting big gains, are facing significant losses. The 2x leveraged and 2x inverse MSTR ETFs are down more than 65% this year, while MSTR stock is only down 12%.

Despite appearing to offer double the returns of the underlying stock, leveraged ETFs like T-Rex 2x Long MSTR Daily Strategy ETF (MSTU) only aim to deliver “200% of the daily performance of MSTR,” leading to unexpected results for longer-term investors.

Investors need to understand the risks involved in leveraged single-stock ETFs, as they are not stock funds but derivatives contracts with daily resets and high turnover, resulting in potentially high transaction costs not reflected in the expense ratio.

The biggest issue affecting leveraged ETF returns is volatility decay, which can lead to significant losses, especially for high-volatility stocks like MicroStrategy. Investors need to thoroughly understand the products they are buying to avoid unexpected consequences.

Volatility is the enemy of leveraged single-stock ETFs, with high transaction fees and significant risks that many investors are unprepared for. Holding these ETFs beyond a few trading days can result in major losses, as demonstrated by the performance of MSTU and MSTZ in 2025.

The performance of leveraged ETFs this year highlights the extreme risks they carry, with volatility drag likely to impact total returns, especially for high-volatility stocks like Tesla, Nvidia, and Palantir. Investors should be cautious and well-informed before investing in these products.

Read more at Yahoo Finance: 2x and -2x MSTR ETF investors are getting hammered with 65% losses. Here’s why and what to know.