3x Leveraged ETF S&P 500 Performance and Strategy

Investing in 3x leveraged ETFs can be a high-risk, high-reward strategy.

These funds aim to deliver three times the daily return of the S&P 500 index.

A 3x leveraged ETF can potentially amplify your gains, but it can also amplify your losses.

It's essential to understand the mechanics of 3x leveraged ETFs before investing.

These funds use financial derivatives, such as options and futures contracts, to achieve their leverage.

The S&P 500 index has historically provided steady returns over the long-term, but 3x leveraged ETFs can be volatile in the short-term.

To minimize risk, it's crucial to set a clear investment strategy and stick to it.

Here's what you need to know about 3x leveraged ETFs on the S&P 500:

They're designed to track the S&P 500 index, but with a 3x multiplier, meaning they aim to return three times the daily performance of the underlying index.

These ETFs use derivatives to achieve their leveraged effect, which can be a double-edged sword - they can amplify gains, but also losses.

They're often used by traders looking to amplify their bets, but it's worth noting that the average holding period for these ETFs is just 1 day.

The 3x leveraged ETFs can be a good option for short-term traders, but they're not suitable for long-term investors.

The S&P 500 index is a market-capitalization-weighted index of the 500 largest publicly traded companies in the US.

The expense ratio for both SPXL and SPXS is quite high, with a gross expense ratio of 0.95% and a net expense ratio of 0.91% for SPXL, and a gross expense ratio of 1.07% and a net expense ratio of 1.07% for SPXS.

These funds have been around since November 5, 2008, and have had a long-term performance of 26.25% since inception. The 10-year performance is also notable, with returns of 23.65% and -39.27% for SPXL and SPXS, respectively.

Here are the key metrics for SPXL and SPXS:

Let's take a closer look at the pricing and performance of these funds. The data is as of January 2nd, 2025, and we can see that the NAV (Net Asset Value) and market price are very close, indicating that the funds are being traded at their fair value.

The 1-month return for SPXL is -8.47%, while the 3-month return is 2.89%. This means that if you had invested $100 in SPXL three months ago, you'd have around $102.89 now.

Here's a summary of the key performance metrics for the funds:

It's worth noting that the expense ratio for SPXL is 0.95% (gross) to 0.91% (net), while for SPXS it's 1.07% (both gross and net). This means that SPXL has a lower expense ratio, which can be beneficial for long-term investors.

Let's take a look at the top ten holdings of this investment portfolio. Apple is the largest holding, making up 7.30% of the total.

The next biggest holding is Microsoft, accounting for 6.57% of the portfolio. This is a significant chunk of the overall investment.

Nvidia is also a major player, with a 6.13% stake in the portfolio. This suggests a strong focus on technology and innovation.

Amazon.Com Inc is another notable holding, making up 3.57% of the portfolio. This is a testament to the company's growing influence and reach.

Here are the top ten holdings in the portfolio:

These holdings provide a good snapshot of the investment portfolio's composition and focus.

Trading is different from investing, and getting the direction right is crucial to taking advantage of short-term trends.

Direxion's leveraged ETFs are powerful tools designed to help you magnify your short-term perspective with daily 3X leverage, allowing you to go where there's opportunity with both bull and bear funds for both sides of the trade.

To stay agile, these funds offer liquidity to trade through rapidly changing markets.

Keep in mind that leveraged and inverse ETFs are riskier than alternatives without leverage and should not be expected to track the underlying index over periods longer than one day.

Direxion's leveraged ETFs pursue daily leveraged investment objectives, making them suitable only for investors who understand leverage risk and actively manage their investments.

Key Benefits:

S&P 500 Bull Shares are designed to magnify short-term gains. They use daily 3X leverage to amplify the movement of the S&P 500 index.

Direxion's Daily S&P 500 Bull 3X Shares, specifically, are built to help you capitalize on upward trends in the market. You can expect daily income dividends, which can add up over time.

Here are some key dates to keep in mind for Direxion's Daily S&P 500 Bull 3X Shares:

These dates and income dividends are just a few things to consider when investing in S&P 500 Bull Shares.

Leveraged ETFs can be a powerful tool for investors, but they also come with significant risks. They magnify gains and losses, which means that even small market fluctuations can result in substantial changes in the ETF's value.

The impact of leverage can be seen in a 3x leveraged ETF, which experiences percentage changes three times greater than the underlying index. For example, if the S&P 500 rises by 10%, a 3x leveraged ETF would rise by 30%.

Leverage can lead to unexpectedly large losses in volatile markets. In fact, after two cycles of 10% rises and falls, the S&P 500 is down about 2%, while the leveraged ETF has fallen by nearly 17.2%. This is known as "volatility decay", where frequent fluctuations lead to a lower end value than would be expected from a simple linear growth model.

It's essential to understand that leverage magnifies losses, not just gains. This means that even if the underlying index ends close to its original value, the leveraged ETF could still experience significant losses.

Here's a summary of the key takeaways: