The riskiest SpaceX stock trade of all had a big first week

SpaceX’s IPO didn’t just mint the biggest debut in market history — it also triggered a leveraged ETF historic land grab.

Within days of SpaceX going public, competing fund firms launched 11 leveraged exchange-traded funds tied to the stock, with the trading volume that followed shattering expectations. There was over $10 billion in levered ETF trading during SpaceX’s first week on the stock market, a shortened holiday trading week which encompassed four days through Thursday. It was one among the many notable market stats that stood out about the deal.

Leveraged single-stock ETFs are designed to deliver a multiple of a stock’s daily return which is typically two times, either long or short. Since these funds reset daily, their returns can drift meaningfully from the underlying stock.

Leveraged Shares led the charge, with three days of over $1 billion in volume in its long SpaceX ETF on Tuesday through Thursday, and significant volume in its short SpaceX ETF as well.

Todd Sohn, chief ETF strategist at Strategas Securities, says the pattern is familiar, even if the scale is uncommon. When a heavyweight name like Nvidia or Tesla gets a leveraged ETF built around it, demand shows up. SpaceX brought to the market not just the largest IPO in market history but Elon Musk’s name attached to it.

Tuesday’s trading volume of $4.2 billion in levered SpaceX ETFs was the peak day for the week.

SpaceX Levered ETFs, first week trading volume

Leverage Shares 2X Long SPCX Daily ETF (SPCH): $4 billionLeverage Shares 2X Short SPCX Daily ETF (SSPC): $2.56 billionGraniteShares 2x Short SpaceX Daily ETF (SNK): $765 millionProShares Ultra SpaceX (SPCF): $607 millionDefiance Daily Target 2X Long SpaceX ETF (SPCU): $557 million GraniteShares 2x Long SpaceX Daily ETF (SPAL): $516 millionDirexion Daily SpaceX Bull 2X ETF (LOFF): $378 millionDefiance Daily Target 2X Short SpaceX ETF (SPCQ): $345 millionTradr 2X Short SpaceX Daily ETF (SPCG): $339 millionT-REX 2X LONG SPCX DAILY TARGET ETF (SPAX): $332 millionTradr 2X Long SpaceX Daily ETF (SPCM): $251 million

Source: Strategas Securities, Bloomberg

The SpaceX IPO attracted a high level of interest from retail investors, but many were limited in their access to shares. Major issuers of the ETFs caution that these portfolios are designed for sophisticated self-directed traders, hedge funds, and proprietary trading desks. The products are not built for buy-and-hold retail investors.

Leverage Shares’ chief revenue officer Paul Marino said a stock moving in one direction “compounds and does really well,” but that flips quickly once the stock turns more volatile, and that will be the real test for investors with these products. SpaceX began the week with two straight days of gains, contributing to Tuesday’s peak volume, but turned negative over the second half of the week.

After the two-day slide in shares, many investors who bought SpaceX shares post-IPO were on the verge of being under water.

Even though the levered ETFs are not core long-term stock or bond market holdings where lowest cost often wins, fees can still be a differentiator in a crowded marketplace.

Leverage Shares expense ratio of 0.75% came in below most of its peers, which could be a factor in its early volume lead.

“If you’re getting a similar product, I don’t care if it’s daily traded or if it’s for long term investing. Fees matter,” Marino said.

But GraniteShares CEO Will Rhind, whose SpaceX ETFs have an expense ratio of 1.50%, pushed back on that logic, saying that for traders holding a position for a few days, the fee difference is irrelevant. “If you’re holding it for a few days, it’s practically free as an investor,” Rhind told CNBC.

Defiance is leaning on timing. Its fund was the only leveraged product actually trading on IPO day.

“Defiance will always be interested in being a market leader in terms of the new single stocks,” said Sylvia Jablonski, Defiance ETFs co-founder and CIO. She said the SpaceX ETF is a natural extension of a lineup of leveraged single-stock funds tied to names like Strategy and Rocket Labs.

It is still an open question as to whether investors will stick with these trades once the record IPO momentum fades.

Leverage Shares is betting on what it calls “a durable base of users” regardless of potential volatility in the stock day to day. Meanwhile, Anthropic and OpenAI are expected to IPO later this year, which could create more competition in the single-stock ETF universe. ETF executives said their firms will be interested in levering up the risk in these stocks for traders once they hit the market.

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