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

SpaceX’s IPO not only marked the largest initial public offering in market history, but also triggered a historic land grab by the leveraged ETF.

in a few days SpaceX Rival fund firms going public launched 11 leveraged exchange-traded funds tied to stocks, and trading volume shook expectations. Leveraged ETF trading in SpaceX’s first week on the stock market was over $10 billion; It was a shortened holiday trading week spanning four days through Thursday. This was one of many key market statistics that stood out about the deal.

Leveraged single-stock ETFs are designed to provide multiples of a stock’s daily return (usually two times long or short). Because these funds reset daily, their returns can differ significantly from the underlying stock.

Leveraged Shares led this rally, with over $1 billion in volume in the long SpaceX ETF over three days from Tuesday through Thursday, and significant volume in the short SpaceX ETF as well.

While the scale is unusual, the pattern is familiar, says Todd Sohn, chief ETF strategist at Strategas Securities. Demand arises when a heavyweight name like Nvidia or Tesla creates a leveraged ETF around it. SpaceX not only launched the largest IPO in the history of the market, but also put Elon Musk’s name on it.

Trading volume of $4.2 billion in leveraged SpaceX ETFs on Tuesday was the highest day of the week.

SpaceX Leveraged ETFs, first week trading volume

• Leverage from Shares 2X Long SPCX Daily ETF (SPCH): 4 billion dollars
• Leverage from 2X Short SPCX Daily ETF Shares (ÖSYM): $2.56 billion
• GraniteShares 2x Short SpaceX Daily ETF (SNK): 765 million dollars
• ProShares Ultra SpaceX (SPCF): 607 million dollars
• Defiance Daily Target 2X Long SpaceX ETF (SPCU): 557 million dollars
• GraniteShares 2x Long SpaceX Daily ETF (SPAL): 516 million dollars
• Direxion Daily SpaceX Bull 2X ETF (LKOFF): 378 million dollars
• Defiance Daily Target 2X Short SpaceX ETF (SPCQ): 345 million dollars
• Tradr 2X Short SpaceX Daily ETF (SPCG): 339 million dollars
• T-REX 2X LONG SPCX DAILY TARGET ETF (SPAX): 332 million dollars
• Tradr 2X Long SpaceX Daily ETF (SPCM): 251 million dollars

Source: Strategas Securities, Bloomberg

SpaceX’s IPO attracted significant interest from retail investors, but many had limited access to shares. Major issuers of ETFs point out that these portfolios are designed for sophisticated self-directed investors, hedge funds and private trading desks. The products are not designed for buy-and-hold retail investors.

Paul Marino, chief income officer at Leverage Shares, said a stock moving in one direction “consolidates and performs really well,” but that quickly reverses as the stock becomes more volatile, which will be a real test for investors with these products. SpaceX started the week with two consecutive days of gains, contributing to Tuesday’s peak volume, but turned negative in the second half of the week.

Following the two-day decline in shares, many investors who bought SpaceX shares after the IPO are on the verge of being underwater.

While leveraged ETFs are not core long-term stock or bond market assets, where lowest-cost typically wins, fees can still be a differentiator in a crowded market.

Leverage Shares’ expense ratio came in below most of its peers at 0.75%, which may be a factor in its early volume leadership.

“If you’re buying a similar product, I don’t care if it’s day trading or long-term investment. 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 the fee difference was negligible for investors who held positions for a few days. “If you hold it for a few days, it’s almost free as an investor,” Rhind told CNBC.

Defiance is based on timing. Its fund was the only leveraged product traded on IPO day.

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

It’s still an open question whether investors will continue these transactions after the record IPO momentum ends.

Leverage Shares is betting on what it calls a “resilient user base” regardless of daily fluctuations in stocks. Meanwhile, Anthropic and OpenAI are expected to go public later this year, which could create more competition in the single-stock ETF universe. ETF managers said their firms will be interested in increasing exposure to these stocks for traders once they hit the market.

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