Best Leveraged S&P 500 ETFs for Q3 2022

SPUU, SSO, and UPRO are the best leveraged S&P 500 ETFs for Q3 2022

Investors looking to diversify their holdings often turn to exchange-traded funds (ETFs). These helpful investment vehicles hold a basket of securities and trade like stocks, thus providing a speedy, efficient option for investors looking to balance their portfolios. ETFs are also an excellent way to track the S&P 500 Index, a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.

The S&P 500 has experienced high levels of volatility in recent years due to the economic disruption caused by the COVID-19 pandemic and other uncertainties. Russia's invasion of Ukraine is the most recent global event disrupting market expectations and heightening volatility. Investors seeking to profit from these swings have the option of using a special and particularly risky type of product, called leveraged ETFs, which also track the S&P 500.

Key Takeaways

  • The S&P 500 Index is a market-capitalization-weighted index of the 500 largest publicly traded companies in the U.S.
  • The 2× leveraged S&P 500 ETF with the lowest fees is SPUU and the 2× leveraged S&P 500 ETF with the highest liquidity is SSO.
  • The 3× leveraged S&P 500 ETF with the lowest fees and highest liquidity is UPRO.
  • The one-year total return of the S&P 500 Index is -1.0%, as of June 1, 2022. But investors should remember that these ETFs are not designed to mimic long-term returns.

Leveraged ETFs comprise a small fraction of available ETFs—and with good reason. They are highly complex investment vehicles with a high-risk, high-cost structure that makes them suitable only for experienced investors who have above-average risk tolerance.

Leveraged ETFs often employ derivatives and debt in an effort to achieve 2× or 3× the daily performance of the S&P 500. The risk is that these ETFs also amplify losses when the S&P 500 declines. As a result, leveraged ETFs are most often used as short-term trading vehicles to minimize risk, with most investors exiting their positions within a few days or less. They are not meant to be used as part of a long-term, buy-and-hold portfolio, and newer traders with low risk tolerance should avoid these types of funds.

Leveraged ETFs can be riskier investments than non-leveraged ETFs, given that they respond to daily movements in the underlying securities that they represent, and losses can be amplified during adverse price moves. Furthermore, leveraged ETFs are designed to achieve their multiplier on one-day returns, but you should not expect that they will do so on longer-term returns. For example, a 2× ETF may return 2% on a day when its benchmark rises 1%, but you shouldn’t expect it to return 20% in a year when its benchmark rises 10%. For more details, see this U.S. Securities and Exchange Commission (SEC) alert.

Below, we’ll take a look at the best 2× and 3× leveraged ETFs tracking the S&P 500 in terms of lowest fees and most liquidity, excluding inverse ETFs and funds with less than $50 million in assets under management (AUM). The best 2× leveraged ETFs are SPUU and SSO. The best 3× leveraged ETF is UPRO.

There is one 3× leveraged ETF that doesn’t track the S&P 500 but does seek to trade some of its highest beta stocks at 3× leverage. It is the Direxion Daily S&P 500 High Beta Bull 3× Shares (HIBL). There are also other leveraged ETFs that either provide leveraged exposure to a specific sector or utilize a factor strategy. But the three examined below are funds that specifically track the broader index, providing the same cap-weighted exposure to all of the companies in the S&P 500.

These funds are not ranked based on their returns over the past year, since they are all tracking the same index and should have relatively similar returns. They are also not ranked by return performance over the long term, since the leverage multiplier of leveraged funds is based on daily returns, as opposed to longer periods of time.

All numbers below are from VettaFi as of June 1, 2022, except as where indicated.

Lowest Fees (2x Leverage): Direxion Daily S&P 500 Bull 2× Shares (SPUU)

Because index-tracking ETFs will follow the performance of the index, one of the biggest determinants of long-term returns—if not the biggest—is how much it charges in fees.

  • Performance Over One-Year: -6.6%
  • Expense Ratio: 0.63%
  • Annual Dividend Yield: 5.30%
  • Three-Month Average Daily Volume: 39,346
  • Assets Under Management: $50.1 million
  • Inception Date: May 28, 2014
  • Issuer: Rafferty Asset Management

SPUU seeks daily investment returns, before fees and expenses, of 200% of the performance of the S&P 500 Index. Investors should not expect this fund to provide two times the cumulative return of the S&P 500 for periods greater than a single day. Investors with a low tolerance for risk may want to consider other investments. SPUU holds shares of the iShares Core S&P 500 ETF (IVV) to track the S&P 500 and uses S&P 500 Index swaps to obtain leveraged exposure to the index.

Highest Liquidity (2x Leverage): ProShares Ultra S&P 500 (SSO)

Liquidity indicates how easy it will be to trade an ETF, with higher liquidity generally translating to lower trading costs. Trading costs are not a big concern to people who want to hold ETFs long term, but if you’re interested in trading ETFs frequently, then it’s important to look for high-liquidity funds to minimize trading costs.

  • Performance Over One-Year: -6.9%
  • Expense Ratio: 0.91%
  • Annual Dividend Yield: 0.17%
  • Three-Month Average Daily Volume: 6,923,255
  • Assets Under Management: $3.5 billion
  • Inception Date: June 19, 2006
  • Issuer: ProShares

SSO seeks daily investment returns, before fees and expenses, that are two times the daily performance of the S&P 500 Index. The fund’s leverage resets daily, resulting in compounding of returns when held for multiple periods. This ETF is designed for investors with a high level of risk tolerance and a willingness to monitor their holdings on a daily basis. SSO holds shares of the companies that comprise the S&P 500 and uses various swaps to provide leveraged exposure to the index.

Lowest Fees and Highest Liquidity (3x Leverage): ProShares UltraPro S&P 500 (UPRO)

Because index-tracking ETFs will follow the performance of the index, one of the biggest determinants of long-term returns—if not the biggest—is how much it charges in fees.

Liquidity indicates how easy it will be to trade an ETF, with higher liquidity generally translating to lower trading costs. Trading costs are not a big concern to people who want to hold ETFs long term, but if you’re interested in trading ETFs frequently, then it’s important to look for high-liquidity funds to minimize trading costs.

  • Performance Over One-Year: -14.4%
  • Expense Ratio: 0.93%
  • Annual Dividend Yield: 0.04%
  • Three-Month Average Daily Volume: 11,495,209
  • Assets Under Management: $2.6 billion
  • Inception Date: June 25, 2009
  • Issuer: ProShares

UPRO seeks daily investment returns, before fees and expenses, that are three times the return of the S&P 500 Index for a single day, as measured from one net asset value (NAV) calculation to the next. The fund’s leverage resets on a daily basis, which results in the compounding of returns when held for multiple periods. Holdings of this ETF should be monitored daily and used only by investors with a high tolerance for risk. UPRO holds shares of the companies that comprise the S&P 500 and uses various S&P 500 Index swaps to provide leveraged exposure to the index.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  1. VettaFi. “2× Leveraged ETF Screener.”

  2. VettaFi. “3× Leveraged ETF Screener.”

  3. Direxion. “HIBL HIBS.”

  4. VettaFi. “Direxion Daily S&P 500 Bull 2× Shares (SPUU).”

  5. Direxion. “Direxion Daily S&P 500 Bull 2X Shares (SPUU).”

  6. VettaFi. “ProShares Ultra S&P500 (SSO).”

  7. ProShares. “ProShares Ultra S&P500 (SSO).”

  8. VettaFi. “ProShares UltraPro S&P500 (UPRO).”

  9. ProShares. “ProShares UltraPro S&P500 (UPRO).”

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