S&P 500 2x Leverage Daily Index (2024)

FAQs

What is the 2X leverage S&P 500? ›

The S&P 500 2x Leveraged Daily Index aims to reflect the performance of the following market: 2x Long Leveraged exposure to the 500 Largest companies listed in the USA. Covers approximately 80% of free-float market capitalisation. Weighted by free-float adjusted market capitalisation.

The Direxion Daily S&P 500^® Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the S&P 500^® Index.

A 2x leveraged ETF is an exchange-traded fund that aims to double the performance of a specific index, asset, or single stock – based on the daily percentage change of that underlying asset. This means that if the asset increases by 1%, the ETF will increase by 2%.

According to large data samples, the ideal leverage for different indexes would have been: S&P 500 (60 years of data): 3X leverage. Dow Jones (80 years of data): 2X leverage. Nasdaq 100 (40 years of data): 2X leverage.

Daily Leveraged ETFs aim to amplify the daily returns of an underlying asset, typically by a factor of 2X or 3X. In other words, if the asset increases by 1% on a given day, a 2X Leveraged ETF seeks to deliver a 2% return – and a 3X Leveraged ETF aims for a 3% return – before fees and expenses, in a single trading day.

What Does It Mean When an ETF Is Leveraged 3x? An ETF that is leveraged 3x seeks to return three times the return of the index or other benchmark that it tracks. A 3x S&P 500 index ETF, for instance, would return +3% if the S&P rose by 1%.

Bottom Line on Leveraged ETFs

Leveraged ETFs decay due to the compounding effect of daily returns, volatility of the market and the cost of leverage. The volatility drag of leveraged ETFs means that losses in the ETF can be magnified over time and they are not suitable for long-term investments.

You can trade at 2x leverage, or 3x, 5x, 10x, or even up to 100x. In other words, leverage multiplies the amount of money you have to invest. So if you have $10,000 in capital, margin trading at 2x leverage would allow you to purchase $20,000 worth of assets.

The daily rebalancing of leveraged and inverse ETFs creates a situation that for periods longer than a day or two the return of a leveraged or inverse ETF will deviate from the margin account benchmark.

The most popular S&P 500 ETF is SPDR S&P 500 (SPY), which is a derivative that fully copies the dynamics of the S&P 500 but costs much less – 1/10 of the price of the main index. This allows investors to buy the S&P 500 without leverage. SPY trades in the same way as all other instruments in the exchange.

Can you leverage S&P 500? ›

Aim: WisdomTree S&P 500 3x Daily Leveraged is a fully collateralised, UCITS eligible Exchange Traded Product (ETP) designed to provide investors with a leveraged exposure to the S&P 500.

All that said, if you are currently using the S&P 500 for your U.S. equity allocation, it's not the end of the world. Compared to an actively managed fund or a stock-picking strategy, the S&P 500 is extremely well diversified, and it can be accessed for almost no cost due to the massive scale of the ETFs tracking it.

It is also known as yield per turn of leverage. For example, two turns of debt means that the company's leverage ratio is 2x. This ratio is commonly used to calculate the ability of an organization to pay-off its debt, and the approximate time within which it can pay off all its debt.

There are different degrees of leverage in margin trading. You can trade at 2x leverage, or 3x, 5x, 10x, or even up to 100x. In other words, leverage multiplies the amount of money you have to invest. So if you have $10,000 in capital, margin trading at 2x leverage would allow you to purchase $20,000 worth of assets.

The leverage ratio is a constant that represents the leverage that an index takes at the opening of a particular trading day. When the leverage ratio is 2, each dollar invested provides USD 2 of exposure to the performance of the underlying index, which means 200% of the risk and volatility.

Aim: WisdomTree S&P 500 3x Daily Leveraged is a fully collateralised, UCITS eligible Exchange Traded Product (ETP) designed to provide investors with a leveraged exposure to the S&P 500.