Best Leveraged S&P 500 ETFs in 2022: Costs & Liquidity Compared

Leading the pack in leveraged S&P 500 ETFs are SPUU, SSO, UPRO, and SPXL, each offering unique advantages for risk-tolerant investors.

Leveraged ETFs utilize derivatives to magnify daily index movements, providing the potential for substantial gains—but also increased losses—especially during market downturns. These funds are designed for short-term trading strategies rather than long-term holding, making them suitable only for experienced investors comfortable with heightened volatility.

We categorized leveraged ETFs into double and triple leverage groups, assessing their expense ratios and three-month average daily trading volumes to identify the most cost-effective and liquid options. Inverse ETFs were excluded from this analysis. All data is current as of November 17, 2022.

Among double-leveraged ETFs, Direxion’s SPUU offers the lowest expense ratio, while ProShares’ SSO boasts the highest liquidity. Conversely, for triple-leveraged ETFs, ProShares’ UPRO leads in cost efficiency, and Direxion’s SPXL offers superior liquidity. Due to their inherently high risk and cost structures, leveraged ETFs are best suited for investors with above-average risk tolerance and active portfolio management.

Key Insights

• The S&P 500 Index experienced a nearly 20% decline over the past year but has shown recent upward momentum.
• Leveraged ETFs aim to deliver multiples of the index’s daily returns through derivative instruments.
• SPUU and SSO represent the most affordable and liquid 2× leveraged S&P 500 ETFs respectively.
• UPRO and SPXL are the top choices for lowest fees and highest liquidity among 3× leveraged S&P 500 ETFs.
• As of November 18, 2022, the S&P 500’s one-year total return stands at -14.4%, but leveraged ETFs are not designed to replicate long-term index performance.

Lowest Fee 2× Leveraged ETF: Direxion Daily S&P 500 Bull 2× Shares (SPUU)

• One-Year Performance: -32.7%
• Expense Ratio: 0.63%
• Annual Dividend Yield: 5.30%
• Average Daily Volume (3 months): 58,597 shares
• Assets Under Management: $52.2 million
• Launch Date: May 28, 2014
• Issuer: Rafferty Asset Management

SPUU targets daily returns that are twice the S&P 500 Index’s performance before fees and expenses. It is important to note that this fund is optimized for daily trading and does not aim to double the cumulative return over longer periods. SPUU achieves its leverage by holding shares of the iShares Core S&P 500 ETF (IVV) and utilizing swaps to enhance exposure. Investors with low risk tolerance should consider alternative options.

Important Note

ETFs with assets under management below $50 million typically exhibit lower liquidity, which can increase trading costs and potentially reduce investment gains or amplify losses.

Highest Liquidity 2× Leveraged ETF: ProShares Ultra S&P 500 (SSO)

• One-Year Performance: -33.0%
• Expense Ratio: 0.89%
• Annual Dividend Yield: 0.17%
• Average Daily Volume (3 months): 6,458,386 shares
• Assets Under Management: $3.0 billion
• Launch Date: June 19, 2006
• Issuer: ProShares

SSO seeks to deliver twice the daily return of the S&P 500 Index before fees and expenses. The fund resets its leverage daily, which can lead to compounding effects over multiple trading days. SSO is designed for investors who actively manage their portfolios and can tolerate significant risk. It holds the underlying S&P 500 companies’ shares and uses swaps to achieve leveraged exposure.

Risk Advisory

Leveraged ETFs carry higher risk due to their sensitivity to daily price movements and potential for amplified losses. They are structured to meet their target multiples on a daily basis, not over extended periods. For example, a 2× ETF may gain 2% when its benchmark rises 1% in a day, but this relationship does not guarantee proportional annual returns. For further details, refer to the U.S. Securities and Exchange Commission’s guidance.

Lowest Fee 3× Leveraged ETF: ProShares UltraPro S&P 500 (UPRO)

• One-Year Performance: -50.2%
• Expense Ratio: 0.91%
• Annual Dividend Yield: 0.04%
• Average Daily Volume (3 months): 13,867,516 shares
• Assets Under Management: $2.3 billion
• Launch Date: June 25, 2009
• Issuer: ProShares

UPRO aims to provide triple the daily return of the S&P 500 Index before fees and expenses, resetting leverage daily to maintain exposure. Due to the compounding effect of daily resets, this ETF is suitable only for investors with a high risk appetite who actively monitor their holdings. UPRO holds shares of S&P 500 companies and uses swaps for leverage.

Highest Liquidity 3× Leveraged ETF: Direxion Daily S&P 500 Bull 3x Shares (SPXL)

• One-Year Performance: -49.9%
• Expense Ratio: 0.97%
• Annual Dividend Yield: 0.12%
• Average Daily Volume (3 months): 14,277,112 shares
• Assets Under Management: $2.7 billion
• Launch Date: November 5, 2008
• Issuer: Rafferty Asset Management

SPXL targets daily returns that are three times those of the S&P 500 Index. Its daily leverage reset means compounding risk is significant for investors holding shares beyond one day. This fund is intended for sophisticated investors with a strong tolerance for risk. SPXL invests in S&P 500 companies and employs swaps to achieve leveraged exposure.

Disclaimer: The information presented is for educational purposes only and does not constitute investment advice. Market conditions can change rapidly, and investors should conduct their own research or consult financial professionals before making investment decisions.

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