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How to Go Long On the S&P 500 With ETFs

Sweta Killa
Rough trading in Deere' shares pushed down agribusiness ETF, especially those with the largest allocation to this farm equipment giant.

Amid global growth concerns, the bulls on the Wall Street have been roaring high this year on signs of progress in trade negotiations between the United States and China as well as a patient Fed. The optimism for U.S.-China trade deal has increased with Trump postponing the date for boosting tariffs on Chinese imports.

This has led to speculation of improvement in Chinese economy, which has been hit hard by Trump’s tariffs last year, and the easing of global slowdown concerns. Additionally, a rebound in oil price brought back momentum in the stock market. Further, rising wages, subdued inflation, higher consumer confidence and increasing consumer spending bode well for America’s economy (read: Top and Flop ETFs at Half-Way Q1).

All these have resulted in the highest closing level for the S&P 500 since Nov 8 and help Dow Jones reclaim the 26,000 mark. Notably, the S&P 500 has rallied 19% from the December low, and is now 5% away from its all-time high. The trend is likely to continue and support the bull market to complete its decade-long run on Mar 9.

How to Play?

Investors can tap this opportunity by going long on the index. There are a number of leveraged products in the market that offer multiple exposure to the index through the use of swaps, options, future contracts and other financial instruments. Below we highlight those and some of the key differences between each:

PortfolioPlus S&P 500 ETF PPLC

This ETF offers 1.25 times (1.25x) exposure to the index and is the cheapest choice in the large-cap leveraged space, charging just 32 bps in annual fees. It has accumulated $71.3 million in its asset base and trades in a small volume of 7,000 shares a day on average. The fund has risen 14.8% over the past month.

ProShares Ultra S&P500 ETF SSO

This is the most popular and liquid ETF in the leveraged space with AUM of $2.4 billion and average daily volume of around 2.3 million shares. The fund seeks to deliver two times (2x) the return of the index, charging investors 0.90% in expense ratio. It has gained 23.5% so far this year (read: 5 Ultra-Cheap Top-Ranked Growth ETFs to Buy Now).

Direxion Daily S&P 500 Bull 2x Shares SPUU

While this product provides 2x exposure to the index, it charges a lower fee of 60 bps. It has a lower level of $9.3 million in AUM and sees a reduced volume of about 13,000 shares a day on average. SPUU has returned 25.4% so far this year.

ProShares UltraPro S&P500 ETF UPRO

This fund provides three times (3x) exposure to the index with an expense ratio of 0.95%. Average trading volume is solid, exchanging nearly 5.9 million shares per day on average. It has amassed $1.4 billion in its asset base and is up 36.4% this year.

Direxion Daily S&P 500 Bull 3x Shares SPXL

Like UPRO, this fund creates 3x long position in the S&P 500 index with the same expense ratio. It has AUM of $1.1 billion and trades in average daily volume of nearly 5.6 million shares. SPXL has gained 36.5% year to date (read: 6 Leveraged ETFs to Play Trade, Oil and Shutdown Hopes).

Bottom Line

As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing, when combined with leverage, may make these products deviate significantly from the expected long-term performance figures (see: all the Leveraged Equity ETFs here).

Still, for ETF investors who are bullish on the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance, and a belief that the trend is the friend in this corner of the investing world.

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Direxion Daily S&P 500 Bull 2X Shares (SPUU): ETF Research Reports
 
ProShares Ultra S&P500 (SSO): ETF Research Reports
 
ProShares UltraPro S&P500 (UPRO): ETF Research Reports
 
Direxion Daily S&P 500 Bull 3X Shares (SPXL): ETF Research Reports
 
PortfolioPlus S&P 500 ETF (PPLC): ETF Research Reports
 
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