Tradr 2X Long AAOI Daily ETF, AAOX, is down 86.1% since March 24. Applied Optoelectronics is down 33.7%
This week Tradr's 2x long fund on Applied Optoelectronics lost 54.6%, a smaller loss than twice the stock's 31.1% drop, because the stock fell every session.
Key takeaways
The Tradr 2X Long AAOI Daily ETF, AAOX, is down 86.1% from its first close on March 24. Applied Optoelectronics, the stock the fund aims to double each day, is down 33.7% from that same close. The fund's loss is more than twice the stock's decline.
From a first close of $34.69 on March 24, it fell to $4.81 on Friday, Oct. 16, its lowest close since it listed on March 23. That close is 95% below the highest price the fund has reached, well above the $34.69 start.
Five down days cushioned both holders
In the week ended Oct. 16, Applied Optoelectronics fell 31.1%, and it fell every session. AAOX lost 54.6%. The Tradr 2X Short AAOI Daily ETF, AAOZ, gained 92.4%.
AAOZ nearly doubled as AAOI fell five days
- AAOI · 75.57
- AAOX · 4.81
- AAOZ · 19.61
In an Oct. 15 release, Applied Optoelectronics described itself as a provider of optical networking products that power artificial intelligence.
The Motley Fool wrote Friday that the drop followed a warning from Broadcom CEO Hock Tan that funding constraints could slow spending on artificial intelligence infrastructure, and that the warning hit optical suppliers including Applied Optoelectronics.
A 54.6% loss is smaller than twice a 31.1% decline. A 92.4% gain is larger than twice that decline.
The stock fell five days in a row, so later losses in the long fund came out of a smaller balance, and later gains in the short fund were added to a larger one. Against a straight double of the week, compounding helped both holders.
Doubling each day's drop and compounding those five results came within half a percentage point of the long fund's loss. Doubling each drop the other way, as a gain, and compounding those, came within half a percentage point of the short fund's rise.
On its fund page, Tradr, the issuer, says AAOX seeks twice the stock's move for a single day, and does not seek that result over any longer period.
A second issuer ran the same daily long bet. The Leverage Shares 2X Long AAOI Daily ETF, AAOG, fell 54.9% this week.
AAOX has $187 million in assets. AAOZ has $11.2 million. This week's gain sat in the smaller fund. The decline since March 24 sits in the larger one.
This week, compounding cushioned a holder of AAOX, with a loss smaller than twice the stock's drop. Since March 24, compounding has cost a holder who kept the fund. The fund is down 86.1% against a 33.7% decline in the stock.
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Frequently asked questions
Why is Tradr 2X Long AAOI Daily ETF down more than twice the stock?
Tradr says the fund seeks twice the stock's move for a single day, not over any longer period, and compounding has cost a holder who kept it since March 24.
Why was this week's loss smaller than twice the stock's drop?
Applied Optoelectronics fell every session, so later losses in Tradr 2X Long AAOI Daily ETF came out of a smaller balance.
What did the short fund do this week?
The Tradr 2X Short AAOI Daily ETF gained 92.4%, more than twice the stock's decline, as later gains were added to a larger balance.
Why did Applied Optoelectronics fall?
The Motley Fool wrote Friday that the drop followed a warning from Broadcom CEO Hock Tan that funding constraints could slow spending on artificial intelligence infrastructure, and that the warning hit optical suppliers including Applied Optoelectronics.
