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

SpaceX’s recent IPO not only made history with the biggest debut in the market but also sparked a frenzy in the leveraged ETF market. Following SpaceX’s public debut, several fund firms quickly launched 11 leveraged exchange-traded funds tied to the stock, resulting in over $10 billion in leveraged ETF trading during SpaceX’s first week on the stock market.

Leveraged single-stock ETFs are designed to provide a multiple of a stock’s daily return, typically two times, either long or short. These funds reset daily, causing their returns to deviate significantly from the underlying stock. Leveraged Shares led the way, with three days of over $1 billion in volume in its long SpaceX ETF and significant volume in its short SpaceX ETF as well.

Todd Sohn, chief ETF strategist at Strategas Securities, noted that the demand for leveraged ETFs tied to heavyweight names like SpaceX is not uncommon. The connection to Elon Musk’s name and the significance of SpaceX’s IPO contributed to the high trading volume seen in these leveraged ETFs.

The SpaceX Levered ETFs saw impressive trading volumes in their first week, with Leverage Shares 2X Long SPCX Daily ETF leading the pack with $4 billion in volume. Other ETFs like GraniteShares 2x Short SpaceX Daily ETF, ProShares Ultra SpaceX, and Defiance Daily Target 2X Long SpaceX ETF also saw substantial trading volumes.

Retail investors showed a strong interest in the SpaceX IPO, but many were limited in their access to shares. Major issuers of the ETFs caution that these products are designed for sophisticated traders, hedge funds, and proprietary trading desks, not buy-and-hold retail investors.

Despite the initial success of these leveraged ETFs, it remains to be seen whether investors will continue to trade them once the IPO momentum fades. Leveraged Shares is confident in its “durable base of users,” while other firms are already eyeing potential IPOs like Anthropic and OpenAI for future leveraged ETF opportunities.

As the competition in the single-stock ETF universe heats up, ETF executives are prepared to leverage the risk in these stocks for traders once they hit the market. The future of leveraged ETFs tied to high-profile IPOs like SpaceX looks promising, but only time will tell how these products will fare in the long run.