By Christine Idzelis
Leveraged ETFs that make bullish or bearish bets on SpaceX shares have been on a wild ride
Leveraged ETFs tied to SpaceX aren’t for the faint of heart.
The excitement around SpaceX shares has quickly faded after they soared in their market debut this month – providing a crushing reminder of just how risky it is to make leveraged bets on single stocks via the exchange-traded-fund market.
Shares of the Leverage Shares 2X Long SPCX Daily ETF SPCH, as well as similar funds that provide traders a way to make a quick, juiced-up profit if the company’s stock goes up, are down around 28% so far this week, according to FactSet data, at last check. SpaceX’s stock (SPCX) has dropped more than 14% over the same period, highlighting the pain of wrong-way bets using leveraged ETFs.
Leveraged ETFs, which use derivatives in targeting multiples of the daily return of a company’s stock, have proliferated in recent years, as short-term traders use them as tools to speculate on the direction of a company’s stock on a given day. Several leveraged ETFs tied to SpaceX began trading on June 15, with FactSet data showing that particular category has so far attracted around $975 million from investors through Monday – in the wake of SpaceX pulling off the largest IPO in history.
For example, the Leverage Shares 2X Long SPCX Daily ETF and ProShares Ultra SpaceX ETF SPCF each target two times the daily return of SpaceX’s common stock, while ETFs such as the Direxion Daily SpaceX Bull 2X ETF LOFF and Defiance Daily Target 2X Long SpaceX ETF SPCU also aim for 200% of the stock’s daily performance.
A tremendous amount of investor anticipation had built up ahead of SpaceX’s initial public offering, with the company’s shares popping well above its IPO price of $135 in its first day of trading on June 12. While SpaceX’s shares closed as high as nearly $202 on June 16, the stock tumbled more than 20% from that peak through Monday to land in bear-market territory.
SpaceX shares have been “highly volatile,” said Steve Sosnick, chief strategist at Interactive Brokers, in a phone interview Tuesday. Leveraged ETFs are “designed as trading vehicles” that are meant to “turbocharge” daily performance, yet many investors may make the mistake of holding them as part of their longer-term strategy, he cautioned.
ETFs that provide investors a way to make leveraged bets on SpaceX raced to the market last week, with the Leverage Shares 2X Long SPCX Daily ETF issued by Themes ETFs among the largest, with around $438 million in assets under management, according to FactSet data, at last check.
See related: Upcoming SpaceX IPO spawns leveraged ETFs for bullish and bearish bets on its stock
For traders turning to the ETF market to bet on a decline in shares of SpaceX, the volatile ride of the company’s stock has resulted in a roughly 25% jump so far this week for the Leverage Shares 2X Short SPCX Daily ETF SSPC, according to FactSet data, at last check. That’s after a bruising drop in SpaceX shares on Monday.
The Leverage Shares 2X Short SPCX Daily ETF seeks the daily inverse leveraged investment results of SpaceX’s stock and is designed to provide minus-200% of its performance on a given day. The fund surged 32.6% on Monday, as shares of SpaceX dropped 16.4%, according to FactSet data.
On Tuesday, shares of SpaceX were briefly in the red before jumping more than 5% in early afternoon trading and then trimming those sharp gains, FactSet data showed, at last check.
Such swings in the company’s shares make for a particularly bumpy ride for leveraged ETFs that magnify the rise and fall in SpaceX shares on any given day. They’re not meant for investors who want to buy and hold a company’s stock – and they can suddenly lead to big gains or losses.
The U.S. stock market was down late Tuesday afternoon, with the S&P 500 SPX falling 1.3%, the technology-heavy Nasdaq Composite COMP dropping 2% and the Dow Jones Industrial Average DJIA slipping 0.1%. So far this week, the S&P 500 was down 1.7%, according to FactSet data, at last check.
-Christine Idzelis
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06-23-26 1557ET
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