The Standard and Poor's 500 index (S&P 500) is an index of 500 companies and a leading indicator of the performance of large-cap U.S. stocks. The index serves as a benchmark by which many investment professionals measure the success of their strategies. The S&P 500 also serves as a barometer of the health of the U.S. economy.

Mutual funds and exchange-traded funds (ETFs) have created many products that correlate with the performance of the S&P 500. Most of these funds are ideal for long-term investors looking to track the performance of the index. However, a few of these products, known as leveraged ETFs, are more suitable for short-term traders. Leveraged ETFs use derivatives and debt to enhance returns on their investments. In addition, some leveraged funds are inverse ETFs and seek results that track the inverse of the performance of the index. The following is a comparison of two inverse, leveraged ETFs based on the S&P 500, as well key information for investors who might find these ETFs attractive.

ProShares UltraShort S&P500 ETF

ProShares UltraShort S&P500 ETF (NYSEARCA: SDS) began trading on July 11, 2006, as a member of the trading-inverse equity category of the ProShares fund family. As of April 19, 2016, the fund had $2.04 billion in assets under management (AUM) and an annual expense ratio of 0.89%. The fund's objective is to achieve daily performance results, before expenses, that equate to two times the inverse of the daily performance of the S&P 500.

The fund generated negative returns over multiple time frames. As of April 19, 2016, the fund's 26-week returns of -12.11% and YTD returns of -8.93% were below average relative to its peer group, while its one-year returns of -12.02% were about average for funds in the leveraged equities category. Over a longer time frame, SDS has performed poorly. The fund's three-year and five-year returns of -59.85% and -78.93%, respectively, rank below average in comparison to its peers.

The fund experienced lower volatility than most other funds in the leveraged equities category, which is likely due to the S&P 500 having lower volatility than most other equity indexes. As of April 2016, the fund's 50-day volatility was 27.43%, and its 200-day volatility was 34.21%.

ProShares UltraPro Short S&P500

ProShares UltraPro Short S&P500 (NYSEARCA: SPXU) is in the trading-inverse equity category of the ProShares family of funds, and began trading on June 23, 2009. As of April 19, 2016, the fund had $785.2 million in AUM and an annual expense ratio of 0.92%. The fund's objective is to achieve daily performance results, before expenses, that equate to 300% of the inverse of the daily performance of the S&P 500. SPXU invests in derivatives to help achieve its performance objectives.

Like SDS, SPXU generated poor returns over multiple time frames. As of April 19, 2016, the fund's 26-week returns of -19.34% and YTD returns of -14.51% were below average compared to its peers. Over an intermediate time frame, the fund's shares also performed poorly both in absolute terms and relative to its peer group. SPXU has one-year returns of -20.68%, three-year returns of -76.36% and five-year returns of -91.86%.

A Comparison

ProShares UltraShort S&P500 ETF and ProShares UltraPro Short S&P500 are both appropriate funds for traders looking to time short-term moves in the market. Both of these funds amplify the daily returns, and not the annual returns, of the S&P 500 index. In addition, both funds seek to profit when the index declines in value. These features make these funds highly speculative instruments.

ProShares UltraPro Short S&P500 (SPXU) is leveraged to produce returns that are three times the inverse daily returns of the S&P 500, while ProShares UltraShort S&P500 ETF (SDS) is leveraged to produce returns that are twice the inverse daily returns of the S&P 500. Therefore, an investor should expect greater daily volatility and a greater daily price range for SPXU than for SDS. Investors who are seeking a larger daily return and who are willing to absorb greater daily risk should prefer SPXU.