Anyone who happened to be holding a leveraged Netflix ETF leading up to last week’s news likely got stung … stranger things have happened.

The company’s blockbuster deal with Warner Bros. Discover sent Netflix’s stock lower, and the target’s stock upward, amid news of a hostile takeover bid by Paramount Skydance and indications by President Trump that he’s not in favor of the acquisition. With Netflix stock down 9.4% over the past five days, 2X leveraged ETFs are unsurprisingly down by about twice that amount. But the stock and corresponding leveraged ETFs are a case study in “decay,” or the tendencies of such products to considerably lag the securities they’re designed to track, particularly when stock prices are volatile. For example, while Netflix stock is up by 9% year to date, the Direxion Daily NFLX Bull 2X Shares (NFXL) is down by 5.5%. If clients are trading leveraged ETFs on the side, advisors might want to help them understand this.

“These are path-dependent,” said Ed Egilinsky, head of global sales and alternatives at Direxion. “After one day, there is going to be compounding. And that leverage can work for or against you … If something is volatile, with not a lot of directional movement, you can lose a lot of money.”

Don’t Look Up (or Down)

That largely explains not only why NFXL is down while the stock is up, but also why Direxion’s Daily NFLX Bear 1X Shares ETF (NFXS) is also down, in that case by over 14% year to date. The divergences in returns support something that the company makes clear about leveraged ETFs: They are intended for experienced traders and not meant to be held for very long.

There are two reasons why leveraged ETFs almost always lag their target stocks over time:

• Volatility decay: “When a stock or an investment loses a certain amount of money, it needs to go up by a higher percentage to get back to even,” Morningstar manager research analyst Zachary Evens said. “Leveraged ETFs multiply that effect.”
• Roll cost: The cost of options used by funds is an incremental charge that isn’t very noticeable on an intraday basis. “This is a built-in mechanism that will lose the fund money over longer periods of time,” Evens said.

Patterns Emerge: As shown by Netflix’s top movie of all time, KPop Demon Hunters, what’s apparent on the surface can be different from what’s below. For leveraged ETFs, that comes down to swaps. “It’s hard for investors to see what’s actually inside them,” said Michael Martin, vice president of market strategy at TradingBlock, pointing to NFLX’s 14.5% allocation to stock with the remainder going to swap agreements. “The leverage does not come from the swap contract. It comes from the ETF choosing to size those swaps at two times the fund’s assets.”

Leveraged ETFs are like matches: Useful, but hold them for too long and you risk getting burned. As Direxion’s Egilinsky noted, every day is a new day. “Your timing matters here,” he said. “These are basically high risk, high reward vehicles.”

Elon Musk once promised that SpaceX wouldn’t go public until it delivered humans to Mars (lest pesky shareholders prioritize short-term profits over the long-term project of Martian colonization). The Red Planet must be within shouting distance, judging by the financial buzz. No, turns out it’s a lot easier to land on the S&P 500 these days than on Mars, so why wait?

On Wednesday, Bloomberg reported that Musk’s aerospace company is moving ahead with plans to raise $30 billion for an initial public offering at an out-of-this-world valuation of $1.5 trillion, with a countdown clock set for mid- to late 2026. And while it may not be on course for Mars, the SpaceX rocket ship might yet deliver next year’s IPO market to a whole new stratosphere.

Reach For The Stars

SpaceX’s potential monster IPO would come after what has been a remarkable rebound year for public listings. Per another Bloomberg analysis published Wednesday, US IPO volume (not including SPACs and closed-end funds) is set to surpass $40 billion this year once medical supply company MedLine prices its IPO next week, easily besting last year’s total. Dealmakers on Wall Street are already preparing for an even bigger 2026. “The velocity of IPO pitch activity is overwhelming, in a good way, across every industry,” Jim Cooney, Bank of America’s head of Americas equity capital markets, told Bloomberg.

Already likely on deck for next year are names such as defense contractor York Space Systems and insurance firm Ethos Technologies, as well as crypto exchange Kraken and construction rental company EquipmentShare. But those names would be easily eclipsed by SpaceX, officially the world’s most valuable private company once again after a recent secondary share sale that valued the company at $800 million. And it may be one of a handful of shooting stars to go public next year:

• Joining SpaceX, of course, might be the world’s second-most-valuable private company, OpenAI, which is similarly eying a $1 trillion valuation. (The difference between SpaceX and OpenAI? SpaceX claims to have been cash flow positive for several years now.)
• Other “centicorns,” or private companies valued at $100 billion or more, possibly making public market debuts next year include Anthropic, ByteDance, DataBricks and Stripe; for reference, the median market cap of an S&P 500 company is about $40 billion. Per Bloomberg calculations, Wall Street could soon usher some $2.9 trillion worth of private companies into public markets.

Two Tickets to Paradise: While Musk may not have a ticket to Mars yet, a SpaceX IPO would be a second ticket to becoming the world’s first trillionaire. The first, of course, is Musk’s recently secured and first-of-its-kind 12-figure pay package at Tesla, which requires the company to reach some moonshot sales goals. Take it as a valuable lesson: Shoot for the moon, twice if you can, for even if you miss, you’ll land atop the Bloomberg Billionaires Index.

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Young investors are glued to their phones, but the extent to which social media shapes their financial decisions is striking. Among investors under 35, 61% have made decisions based on finfluencer recommendations, according to a new FINRA report. Across all age groups, nearly a third of investors use social media as an information source. Turning to the internet for guidance isn’t always a bad thing, but many of these same investors are far too confident in their financial knowledge. Half couldn’t identify clear signs of fraud, such as a product promising a “guaranteed, risk-free 25% annual return,” the report found. Even those with professional financial planners can be at risk, and advisors need to remind clients of the pitfalls of believing everything they hear on the internet.

“That myth of ‘fraud only happens with the little lady living alone on limited means’ just isn’t true,” FINRA President Gerri Walsh said during a press conference last week. She added that younger investors are frequently targeted precisely because they’re digital natives.

A Bad Finfluence

Social platforms can generate enthusiasm for riskier products. While most investors don’t dabble in meme stocks, about 30% of those ages 18 to 34 have bought a meme stock or similar investment simply because it was trending, according to FINRA.

The report also found:

• YouTube, Reddit and Instagram are among the top places investors go for information.
• Newer investors and people of color, particularly Black and Latino investors, are more likely to seek recommendations from finfluencers.

Follow Me. There are clear reasons people turn to social media for financial guidance. The content is free, accessible and abundant. Plus, events like the 2008 financial crisis and the long-term underperformance of active funds have also fueled distrust of traditional financial institutions, said Richard Coffin, investment analyst and host of the Plain Bagel YouTube channel.

While many creators offer well-researched information, those voices are often drowned out by more sensational and potentially harmful content. Coffin has a series of videos dissecting unsafe investing advice on TikTok. “You think about what type of videos pop up in your feed, and which one would do better — a balanced analysis with a nuanced take on a given stock, or a video promising thousands of percentage points of return?” he said. “There’s an incentive, unfortunately, to post hyperbolic content, even if it’s not inherently good advice.”