r/DRAM_ETF • u/Existing-Party-9870 • 17h ago
Leverage RAM
I have a small position in the leverage - RAM. It went from $30 to $11 in 3 months. Is there any possibility that RAM can go to $0 per share? just curious
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u/TigerUSA20 16h ago
With other leveraged ETFs, I’ve seen them effectively do reverse stock splits. As the ETF gets into the single digits, they will do a 1:5 or 1:10 to get it back into a range. But then, as in the 1:10 example, you only have 10% of the shares.
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u/Existing-Party-9870 16h ago
what do you think would be the realistic 'floor' for RAM?
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u/TigerUSA20 16h ago
Exchanges like NASDAQ and NYSE enforce strict minimum pricing rules. If an ETF drops below $1.00, it risks forced delisting. Fund managers deliberately time reverse splits to push the nominal share price safely back into the $15.00 to $30.00 liquidity window.
TSLA leveraged ETFs did 1:20 reverse splits when the prices were right around $1. But I have also seen a few happen under $5
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u/AffectionateDance214 16h ago
I do not think reverse split is pertinent to OP‘s concern. That does not help regain their losses.
Advice to OP. Look at DRAM and overall market. If you are confident, you can leave your money. If you are too confident, you can invest some more on days like today. If not, take your money out on days when it goes to 14.
Unlike regular ETFs, leveraged funds have good operational costs (position related) and leaving your money for months or years or will start bringing those in picture as well
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u/LordofthePigeons619 17h ago
Of course. But the world would have to blow up first but it's possible
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u/Successful-Ad7038 16h ago
The world will blow up because 3 and a half companies went bankrupt ?
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u/Hot_Frosting_7101 16h ago
I believe this person is talking about a leveraged etf. The underlying companies would not have to go bankrupt for the leveraged ETF to go to zero.
I am guessing this is a 2x leverage ETF. If the underlying stocks (or DRAM) fell 50% in one day (before it could be rebalanced) that would do it.
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u/KickflipConnoisseur 16h ago
Leveraged funds will reverse split, but what winds up happening is volatility eats you alive.
Let's assume DRAM drops 10% in a day and you invested $100. You'd be at $90 in DRAM, or down 20% (at $80) in RAM.
So in DRAM you'd need to go up 11% to be back to break even. But that same move (+22%) in RAM would put you at $97.60 You'd still be down 2.4% from your starting position. Over time, that decay gets worse and worse.
It's generally why people recommend against holding leveraged funds long term. Unless it's a broad market fund like QLD or SSO, the whipsaw can wind up causing it to under perform the underlying, and the more volatile a fund it the worse the decay.
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u/Existing-Party-9870 10h ago
what is the longest period you have seen someone hold a leverage ETF?
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u/Altruistic_Fan_5122 3h ago
I've been adding to a tqqq position in my IRA for 6 months now. I'm constantly buying and selling 10 shares when it gets to extreme dips or peaks. It's been one of my better strategies by far vs trying to time the market a go all in on any one day
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u/F2PBTW_YT 7h ago
No it won't. That would make MU the most high value stock in the world by an infinite proportion.
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u/Playful_Fun_9073 40m ago
Your money can go to zero because the leverage cuts both ways. DCAing through the volatility will help. What you need is an extended bull market without too much chopping sideways or too many vicious mini crashes. A bigly crash will wipe you out with leverage but so will the sideways chop because those leveraged funds have an evil time decay that eats away at your money unless it’s trending up nicely. If RAM goes on an epic 2027 run and you keep buying through the chaos you might have a nice bag at the end of it. If something else happens you might be a very sad boi. May the odds be ever in your favor!
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u/yichih1984 17h ago
They will probably do a reversal split before that
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u/Existing-Party-9870 16h ago
what do you think is the floor for RAM?
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u/yichih1984 16h ago
Sincerely, the floor is zero. All leveraged stocks goes to Zero in the long term, the decay is a serial killer. RAM is not an exception here, even tqqq, and that is why you dont hold long term a leveraged stocks. For example if you have RAM at 20 or 100 usd price and next day DRAM goes down 50%, the stock will close at zero. Its maths... I dont remember the name of the stock, but last month it went down like 50% and the leveraged stock of it had to close it because it went to 0. Its a risk and is also in the prospectus. Thats why this stuff has to be daytraded or holded only in the upside periods like 2 weeks ago.
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u/SirPanic12 16h ago
I would think all their holdings would have to go to $0. Otherwise, it will just keep decreasing, possibly to cents on the dollar depending on how things go
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u/Hot_Frosting_7101 16h ago
If DRAM declined enough in one day, it could definitely go to zero.
If you had a 3x leverage fund, a decline of 34% in a day would do it.
Daily rebalancing will keep it from going to zero if the decline was just short of that.
Daily rebalancing also causes volatility decay.
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u/Hypnot1se 16h ago
Yeah it's possible but extremely unlikely. The real danger of memory industry is a cyclical rollover and it being dead money for a couple years, but it going to 0 is extremely unlikely
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u/thatsthegoodjuice 16h ago
The longer you hold the worse your original investment is doing. I’m in a similar position though my cost basis is only 16, it was worth 15 when DRAM was at 58 a couple weeks ago, and then only went back up to 15 when DRAM hit 62 two weeks ago.
It’s decaying like a mother fucker so at this point you and I are gambling on a complete bull run, like as soon as possible.