SSO: Good For Short-Term Tactical Exposure To S&P 500 Upside
We are bullish on the S&P 500 due to positive market catalysts like potential Fed rate cuts and progress on trade deals. The ProShares Ultra S&P500 ETF offers leveraged exposure, amplifying both gains and losses, making it suitable for tactical, short-term trades. Current S&P 500 valuations are historically high, increasing risk, especially when combined with the compounding effects of leverage and volatility.
SSO Can Amplify A Trader's Returns Over The S&P 500
SSO offers 2x daily S&P 500 exposure, making it suitable only for active traders due to daily resets and compounding risk. The ETF combines equities and derivatives, providing minimal value decay compared to pure derivative strategies. Given my bullish S&P 500 outlook and SSO's structure, I recommend a BUY for traders, but urge diligent risk management before investing.
The SSO ETF Provides Leverage: The Trend Is Always Your Best Friend
The S&P 500 Index has shown a long-term bullish trend, with significant returns since 1980, despite occasional corrections. ProShares Ultra S&P500 ETF offers leveraged exposure to the S&P 500, magnifying gains but also increasing risk due to time decay. Lower interest rates, potential tax cuts, and regulatory changes under the Trump administration could support higher stock prices in 2025.
SSO: Not A Good Time For Leverage
Leveraged ETFs like ProShares Ultra S&P500 (SSO) amplify returns both on the upside and on the downside. SSO aims to achieve 2x the daily performance of the S&P 500 but fails to maintain this over extended periods due to beta slippage effects. With current high P/E levels, the S&P 500 is overvalued, suggesting a potential pull-back, making leveraged funds like SSO risky.
Why We Ventured Back Into S&P 500 Before Election Resolution
We planned to sit on our hands preelection. Here's why we didn't.
Leveraged ETFs: Monthly Watchlist And SSO Ongoing Decay
Leveraged ETFs usually underperform over the long term due to daily volatility. Semiconductors ETFs had the largest decay in one month. ProShares Ultra S&P500 has shown moderate negative drift since its inception, but a large drawdown and underperformance in simulations dating back to 2000.
SSO: Only If The Future Looks Like The Past
The S&P 500 had a stunning year, passive market-cap weighted indexing worked historically well. ProShares Ultra S&P500 ETF is a 200% leveraged ETF, and the compounding effects can be significant. The SSO ETF offers increased exposure to US large-caps but carries risks including counterparty risk and potential expense ratio impact.
