The riskiest SpaceX stock trade ever had a big first week

SpaceX’s IPO didn’t just spawn the biggest startup in stock market history — it also sparked the world’s most historic ETF rally.

In a few days SpaceX to the public, competitive fund firms have launched 11 exchange-traded funds tied to stocks, with trading volume that has beaten expectations. There was more than $10 billion in ETF trading concentrated during SpaceX’s first week on the stock market, a holiday-shortened trading week that spanned four days through Thursday. It was one of the notable market figures that stood out about the deal.

Leveraged single stock ETFs are designed to deliver the daily return of a stock that is usually two times, long or short. Since these funds reset daily, their returns can effectively drift into the underlying stock.

Leveraged Shares led the charge, with three-day volume of more than $1 billion in its long SpaceX ETF Tuesday through Thursday, and heavy volume in its short SpaceX ETF.

Todd Sohn, chief ETF strategist at Strategas Securities, says the pattern is familiar, even if the scale is unusual. When a heavyweight name like Nvidia or Tesla gets a strong ETF built into it, demand arises. SpaceX brought to the market not only the largest IPO in the history of the market but also Elon Musk’s name attached to it.

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

SpaceX Levered ETFs, first week trading volume

• Leverage Shares 2X Long SPCX Daily ETF (SPCH): $4 billion
• Leverage Shares 2X Short SPCX Daily ETF (SSPC): $2.56 billion
• GraniteShares 2x Short SpaceX Daily ETF (SNK): $765 million
• ProShares Ultra SpaceX (SPCF): $607 million
• Defiance Daily Target 2X Long SpaceX ETF (The SPCU): $557 million
• GraniteShares 2x Long SpaceX Daily ETF (SPAL): $516 million
• Direxion Daily SpaceX Bull 2X ETFLOFF): $378 million
• Defiance Daily Target 2X Short SpaceX ETF (SPCQ): $345 million
• Tradr 2X Short SpaceX Daily ETF (SPCG): $339 million
• REX 2X LONG SPCX DAILY TARGET ETFSPAX): $332 million
• Company rating Tradr 2X Long SpaceX Daily ETFSPCM): $251 million

Source: Strategas Securities, Bloomberg

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

Leverage Shares chief income officer Paul Marino said that stocks moving in one direction are “consolidating and doing really well,” but that changes quickly when the stock is highly volatile, and that will be the real test for investors with these products. SpaceX started the week with two straight days of gains, contributing to Tuesday’s surge in volume, but turned negative in the second half of the week.

After a two-day slide in shares, many investors who bought SpaceX shares post-IPO were at risk of being underwater.

Even though leveraged ETFs aren’t long-term stocks or bonds in a market where lower costs often win, payouts can still vary in a crowded marketplace.

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

“If you find the same product, I don’t care if it’s a daily trade or a long-term investment. Funds are important,” 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 difference in currency is irrelevant. “If you hold it for a few days, it’s free as an investor,” Rhind told CNBC.

Infidelity depends on time. Its fund was the only profitable product that actually traded on the day of the IPO.

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

It remains an open question whether investors will stick with this trade if the IPO record fades.

Leverage Shares is betting on what it calls a “strong user base” regardless of the potential fluctuations in the stock from day to day. Meanwhile, Anthropic and OpenAI are expected to IPO later this year, which could create more competition in the single-stock ETF space. ETF managers said their firms would be interested in taking risks in these stocks to dealers once they entered the market.

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