GraniteShares is winding down the GraniteShares 2x Long LCID Daily ETF (NASDAQ:LCDL), marking the first shutdown of a U.S.-listed single-stock leveraged ETF, underscoring the risks embedded in high-leverage exchange-traded products. This was the consequence of a 50% plunge in Lucid Group Inc. (NYSE:LCID) shares on Tuesday, which drove the fund’s NAV below zero.
The fund, which sought to deliver 200% of the daily performance of Lucid stock through swap agreements, was forced to unwind its exposure after its swap counterparty exercised its contractual right to terminate the position. The liquidation resulted in losses large enough to drive the ETF’s NAV below zero, making the fund unsustainable.
According to GraniteShares, the fund’s governing documents and swap agreements allowed its counterparty to immediately close out the swap position if Lucid experienced an extreme one-day decline. Following the liquidation, the ETF’s assets were insufficient to cover its obligations, resulting in a negative NAV and ultimately its delisting from Nasdaq.
The ETF issuer noted that this outcome was explicitly disclosed in the fund’s prospectus. Investors were warned that a decline of more than 50% in the underlying stock could result in losses exceeding the fund’s assets and allow the swap counterparty to terminate its exposure.
A Reminder of Single-Stock Leveraged ETF Risks
Bloomberg Intelligence ETF analyst Eric Balchunas said LCDL marks the first termination of a U.S. 2x single-stock ETF this year, although similar closures have occurred in Europe, where products often employ even higher leverage.
“We have our first termination of a 2x stock ETF in the U.S. this year,” Balchunas wrote on X, adding that while the fund had little in assets, the episode is “a good reminder of the vol of some of these.”
Unlike leveraged ETFs tracking diversified indexes, single-stock leveraged ETFs are exposed to company-specific events that can trigger dramatic one-day price swings. Because they reset leverage daily and rely on derivatives such as swaps, these funds are designed primarily for short-term tactical trading rather than long-term investing.
Industry Continues to Expand Leveraged ETF Lineup
The closure comes even as issuers continue rolling out leveraged ETFs tied to individual stocks across high-growth sectors, including artificial intelligence, semiconductors and cryptocurrencies. Recent launches have included products linked to SK Hynix Inc (NASDAQ:SKHY), Space Exploration Technologies Corp (NASDAQ:SPCX), and memory-chip themes, reflecting strong investor demand for amplified exposure to volatile stocks.
Although LCDL represented only a small corner of the ETF market, its collapse provides one of the clearest examples yet of the structural risks associated with single-stock leveraged ETFs. The episode highlights that while these products can magnify gains, extreme moves in the underlying stock can also rapidly erode their value—and, in rare cases, force a fund’s closure altogether.
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