S&P 500 ETF

ProShares has a triple short S&P 500 ETF called the ProShares UltraPro Short S&P500 which trades under the ticker symbol SPXU.

This is a very actively traded contract trading several million shares per day so liquidity is not an issue.

The annual expense ratio is .95% (95 Basis Points) which is normal for these leveraged ETF products.

This ETF is for traders who want to take a leveraged position against the S&P 500 Index. It is designed to provide a triple inverse or -300% correlation to the daily performance of the S&P 500 Index minus fees and expenses. In other words, if the S&P 500 falls by 1% then SPXU should rise about 3%.

Since leveraged ETFs are designed strictly for short term trading, not long term investing let’s take a look at a short term chart and see how well this relationship works.

Here is a 10 day chart of SPXU compared to the price movement of the S&P 500 Index. You can see that over the 10 day period the index rose just under 2% and SPXU was down nearly 6% so you can see that in the short run it works as it should.

The problem with Leveraged ETFs is that you need to have very good market timing skills, that’s why most of the volume comes from short term traders. These ETFs are not designed for the average investor.