Direxion Daily Semiconductors Bull 3x Shares (SOXL), a leveraged ETF tracking semiconductor stocks, plummeted 14.57% in Thursday's trading session. This sharp decline comes on the heels of an extraordinary 54.8% surge during Wednesday's session, highlighting the volatile nature of leveraged ETFs.
The previous day's rally was part of a broader market upswing triggered by U.S. President Donald Trump's announcement of a 90-day tariff pause for many countries. This news brought relief to investors concerned about the global economic impact of U.S. trade policies, leading to significant gains across the market, particularly in the tech sector. SOXL, being a triple-leveraged ETF focused on semiconductors, experienced an amplified version of this market movement.
Wednesday's trading saw high option activity for SOXL, with 860,900 contracts traded, a 41% increase from the previous day. Notably, 70% of these were call options, indicating strong bullish sentiment. The subsequent plunge suggests a potential correction or profit-taking following the outsized gains. Investors should be aware that leveraged ETFs like SOXL amplify both gains and losses, making them particularly susceptible to rapid price swings. This dramatic reversal serves as a reminder of the high-risk nature of such instruments and the importance of careful risk management in volatile market conditions.
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