Xtrackers S&P 500 2x Leveraged Daily Swap UCITS ETF 1C | DBX0B5 | LU0411078552 (2024)

FAQs

What is Xtrackers S&P 500 inverse 2x? ›

Index facts

The S&P 500 2x Inverse Daily Index aims to reflect the performance of the following market: 2x Short 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 S&P 500® Leverage (2x) index tracks the two times leveraged performance of S&P 500® on a daily basis. The S&P 500® index tracks large cap US stocks. The ETF's TER (total expense ratio) amounts to 0.60% p.a.. The ETF replicates the performance of the underlying index synthetically with a swap.

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%.

Xtrackers S&P 500 Value ESG ETF (the “fund”), seeks investment results that correspond generally to the performance, before fees and expenses, of the S&P 500 Value ESG Index (the “Underlying Index”).

Inverse ETFs carry many risks and are not suitable for risk-averse investors. This type of ETF is best suited for sophisticated, highly risk-tolerant investors who are comfortable with taking on the risks inherent to inverse ETFs.

The most likely to buy an inverse ETF would be an investor who thinks that a particular stock or sector, such as Apple stock, will go down in value. This is because an inverse ETF is designed to increase in value when the underlying assets or index it is tied to decreases in value.

Leveraged ETFs are exchange-traded funds that use derivatives and debt instruments to magnify the returns of a benchmark or index. Leveraged ETFs can generate returns very quickly, but they are also very risky.

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.

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.

Note. Because of how leveraged ETFs are constructed, they are only intended for very short holding periods, such as intraday. Over time, their value will tend to decay even if the underlying price movements are favorable.

Can you lose more than you invest in leveraged ETFs? ›

In other words, you could potentially be liable for more than you invested because you bought the position on leverage. But can a leveraged ETF go negative? No. If you own a leveraged ETF you can't lose more than your initial investment amount.

Leverage Shares uniquely replicates the payout of its ETPs physically, so it holds the stocks underlying its leveraged ETPs and receives the dividends on such stocks. However, such dividends are reinvested in more shares of the underlying stock.

Investing in an S&P 500 index fund is a way to diversify an investor's portfolio. An ETF or a mutual fund allows investors to gain exposure to a variety of stocks included in the index such as Apple, Microsoft, or Walmart. Options trading entails significant risk and is not appropriate for all investors.

How Does an S&P 500 ETF Differ from an S&P 500 Index Fund? Both an index ETF and an index mutual fund passively track the S&P 500 index in order to duplicate its return. ETFs trade like stocks on exchanges, while mutual funds can only be traded at the end of each trading day.

The SPDR S&P 500 ETF Trust (SPY), also known as SPY, is an exchange-traded fund that tracks the performance of the S&P 500 index. The S&P 500 is a stock market index that measures the performance of 500 large cap publicly traded companies in the United States.

Leveraged or inverse ETFs deliver the desired returns over prespecified periods only—usually one day. By “desired returns,” we mean the stated multiple (2x or -1x, for example) of the fund's underlying index; that is, an ETF that offers 2x exposure to the S&P 500 only attempts to do so over one-day holding periods.

An inverse ETF like the SPXU is designed to move in the opposite direction of the S&P 500, using leveraged investments such as short sales and futures contracts. Futures contracts are derivatives, meaning they derive their value from an underlying asset or security.

Say an investor buys a 3X leveraged ETF and the underlying index drops by 1%, our investor just incurred a 3% loss. This same concept applies when investing in inverse leveraged ETFs, but with an opposite effect. If the index gains 1% and the investor holds a 3X leveraged inverse ETF, the investor would lose 3%.