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Introduction
The Direxion Daily S&P 500 Bear 3X Shares ETF (SPXS) has surged so far in 2025, delivering a total return of 51%. This comes as the S&P 500, tracked by the SPDR S&P 500 ETF
SPXS: Time To Trim Downside Hedges (Rating Downgrade)
Summary
- The Direxion Daily S&P 500 Bear 3X Shares ETF seeks to deliver 300% (3x) the inverse return of the S&P 500 index.
- The ETF has surged in value as the S&P 500 retreats from extremely overvalued levels.
- I outline reasons for reducing hedges such as the SPXS, as well as why they may still make sense in the current environment.
- I ultimately believe the prevailing bearish sentiment, as well as higher earnings and dividend yield in the face of falling risk-free interest rates, warrants a Hold rating for SPXS.
- Key SPXS risks to consider include disastrous long-term performance and beta slippage.
I ventured into investing in high school in 2011, mainly in REITs, preferred stocks, and high-yield bonds, starting a fascination with markets and the economy that has not faded despite the years. More recently I have been combining long stock positions with covered calls and cash secured puts. I approach investing purely from a fundamental long-term point of view. On Seeking Alpha I mostly cover REITs and financials, with occasional articles on ETFs and other stocks driven by a macro trade idea.
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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