The true risk of leveraged ETF's like TQQQ is not so much the risk of large losses in a downturn, but rather that under extreme market conditions the fundamental mechanism that powers the ETF will break down in some unexpected way.
These leveraged funds are made up of complex derivatives, if the funds counterparties (UBS, Goldman, Societe Generale etc.) are unable to make good on their existing trades with proshares, or refuses to allow proshares to open new derivative positions it spells trouble for TQQQ and other leveraged ETF's.
In a 2008 style scenario funds like TQQQ would be hit particularly hard by 1. leveraged exposure to crashing markets and 2. bankrupt counterparties going bad on TQQQ's swaps.
These leveraged funds are made up of complex derivatives, if the funds counterparties (UBS, Goldman, Societe Generale etc.) are unable to make good on their existing trades with proshares, or refuses to allow proshares to open new derivative positions it spells trouble for TQQQ and other leveraged ETF's.
In a 2008 style scenario funds like TQQQ would be hit particularly hard by 1. leveraged exposure to crashing markets and 2. bankrupt counterparties going bad on TQQQ's swaps.
See https://www.proshares.com/media/prospectus/tqqq_summary_pros...