macrocephalopod

As an illustration assume a $100 portfolio which is levered 5:1 so has $500 of stock and $400 of debt. If the stock rises 20% you now have $600 of stock, $400 of debt and portfolio value of $200. So you have a 100% return (= 5 x 20%) but you are now only levered 3:1

To maintain leverage you need to buy another $400 of stock using a loan, giving a portfolio of $1000 stock and $800 of debt. If the stock rises 20% again (gains of $200) you need to buy another $800 of stock, and if it rises 20% a third time you need to buy another $1600.

After three 20% rises you have increased your portfolio size from $500 to $4000 -- an increase of $3500, of which $700 was investment gains and $2800 was new purchases.

Now if the stock falls 20%, your portfolio falls to $3200 (loss of $800) but it completely wipes out your equity. You need to sell the remaining $3200 of stock because you can no longer meet margin calls.

On the round trip the stock was up 38.2%, you bought $3300 of stock, sold $3200, and lost your initial account balance of $100. Leverage!

The *right* way to read the FT/Bespoke chart is that there was a loss of about $22 billion (not totally accurate, but ballpark if you think Archegos lost $15 billion and banks lost $7 billion) and around $88 billion of stock sold (not far off the $85 billion estimates)

Any mocking should be reserved for @Fxhedgers and anyone who uncritically retweeted their 'story'. Fin!