Index futures vs. Leveraged ETFs

C

cunparis

I've got a position in SSO which is a 2x leveraged ETF for the S&P 500. I'm curious what are the pros and cons of leveraged ETFs versus futures? For me I'm using the ETF simply because it's in my fidelity account and they don't do futures. I keep my IB account for day trading.

However if the margin is less for futures I think it may be more interesting to buy ES instead of SSO.

What do you think?
 
Futures are better if you are a proven consistently profitable trading.

On the other hand if you are just testing waters they can be suicidal.

Daniel
 
This is for a long term hold and I'm quite bullish on the S&P long term.

I didn't think of the expenses, that's a very good point.

I'm thinking a 60k investment in SPY, 30k in the SSO, or 1 ES contract, it should all be about the same.

Can the ES be rolled over before it expires? is it automatic?
 
Quote from cunparis:

This is for a long term hold and I'm quite bullish on the S&P long term.

I didn't think of the expenses, that's a very good point.

I'm thinking a 60k investment in SPY, 30k in the SSO, or 1 ES contract, it should all be about the same.

Can the ES be rolled over before it expires? is it automatic?
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Based on what you said, an ETF sounds better.

The biggest advantage of ES futures (besides leverage) is the 60/40 tax treatment. But if you plan on holding for more than a year, 60/40 actually hurts you.

And then there is the rolling over every three months which takes a bit of work and of course paying commissions.
 
Quote from cunparis:



What do you think?
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It depends on what you want to do with the account. If you want to free up cash to trade other instruments, then use the ES and just roll it over every 90 days. If free cash isn't a need, just stick with the SSO.
 
As mentioned above - futures are a much better vehicle for active traders due to the Mark-to-Market treatment for Tax Purposes - which is available to all commodities traders. Check it out with a good accountant who works with traders.
 
Quote from cunparis:

I've got a position in SSO which is a 2x leveraged ETF for the S&P 500. I'm curious what are the pros and cons of leveraged ETFs versus futures? For me I'm using the ETF simply because it's in my fidelity account and they don't do futures. I keep my IB account for day trading.

However if the margin is less for futures I think it may be more interesting to buy ES instead of SSO.

What do you think?
More...
With an SSO share, you are controlling just $120 (2 x $60 the SSO price) worth of S&P.
With an E-Mini S&P future you are controlling $64,650 (50 x index), of S&P.
 
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