Can a leveraged ETF's net assets suddenly go below zero?

External question — Personal Finance Stack Exchange Author: Flux Original post: https://money.stackexchange.com/questions/145031 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. When trading stocks on margin or when holding futures, sudden price movements may wipe out the posted margin. In some cases, the trader may even lose more than the posted margin (i.e. the trader owes money to his/her broker). Given that leveraged ETFs employ instruments that require the use of margin, is there a risk that adverse price movements could similarly wipe out all of the ETF's assets (and more)? This would result in the negative net assets. Is this possible?

External answer — Personal Finance Stack Exchange Author: Bob Baerker Original post: https://money.stackexchange.com/a/145033 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. For securities purchased on margin, the potential gain as well as the potential loss is increased. The higher the amount of borrowing (leverage), the greater the chance of the position's equity being wiped out and the less the amount of drop in the underlying assets that it takes to get there. A loss of 1/3 the value of a 3x ETF would wipe out the ETF's assets.