Billionaire Bill Ackman Challenges the Value of Highly Leveraged Trading
Billionaire investor Bill Ackman is challenging the value of high-risk trading tools like leveraged ETFs and zero-day options. In a post on X.com, Ackman questioned whether products like 3X leveraged exchange-traded funds and zero-days-to-expiration (0DTE) options offer any real benefit to society or the economy. These tools are often used by traders to make quick profits, but Ackman suggested they may instead be adding unnecessary risk to the market.
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Leveraged ETFs, such as the ProShares UltraPro QQQ (TQQQ), are designed to multiply gains or losses tied to an index. Interestingly, TQQQ has seen over $2.3 billion in inflows this week alone to set a record. Meanwhile, 0DTE options, which are contracts that expire within a day, have been criticized for increasing stock market volatility. These contracts are frequently used to trade major indices and ETFs like the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ), therefore making their influence on daily price movements hard to ignore.
Indeed, Ackman believes that the recent swings in rates, currencies, and equities are less about economic fundamentals and more about technical factors. Specifically, he points to traders with extreme leverage that are being forced out of their positions. He also warned that markets have become unreliable as short-term indicators of policy changes and questioned why such high levels of leverage are allowed. 'When did we as a society decide to abandon the margin rules that were meant to protect markets from this kind of volatility?' he asked.
Is QQQ a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the Nasdaq 100-tracking QQQ ETF based on 90 Buys, 12 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average QQQ price target of $530.85 per share implies 16.9% upside potential.
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