Way back last week (time flies when you’re over 40), I casually mentioned that leveraged ETFs pose a meaningful accelerant risk in the presence of a pronounced downside stock move.

I’ve been over the specifics at least three times in the space of three weeks, so I won’t recapitulate other than to emphasize that the more AUM these products have, the more impactful they can be on the late-day rebalance.

On Thursday afternoon in the US, with a couple of hours still to go before the close, the major benchmarks were on track for their worst day since Donald Trump’s triple-digit China tariff threat on October 10 and their second-worst session since April.

There were a number of possible explanations — e.g., the odds of another Fed cut next month appear to be fading even as labor market worries intensify, the usual AI bubble chatter was in play and so on — but it’s worth asking if traders, now wise to the levered product EOD flow on “big move” days, are trading ahead of it.

“People are starting to get the joke on the impact of leveraged ETFs being such a massive force in the current market structure,” Nomura’s Charlie McElligott remarked.

The figure above shows you Nomura’s estimate for that EOD rebalance on Thursday as it stood around 1:45 ET: $17 billion.

In terms of drag on Thursday, that impact — “the synthetic negative gamma from the retail proxy leveraged ETF positioning,” as Charlie put it — had the potential to weigh pretty heavily.

Knowing that, some folks might’ve gotten out ahead of it, McElligott suggested. When that kind of “carnage” (his word) is visible on the horizon, it’d be natural for savvy traders to front-run it.