3 Reasons to Buy SSO, and 2 Reasons Not To

James Brumley, The Motley Fool

Tue, Jul 1, 2025, 8:22 AM 7 min read

• So-called "leveraged" ETFs like the ProShares Ultra S&P 500 fund magnify broad market index's gains.

• They equally magnify their losses, however, turning into serious liabilities when stocks suffer prolonged downtrends.

• Whether or not SSO is worth a shot depends on what kind of investor you are and how committed you can remain before flinching.

• 10 stocks we like better than ProShares Trust - ProShares Ultra S&p500 ›

Even the biggest fans of exchange-traded funds (or ETFs) will acknowledge they have one big drawback. That is, although they're an easy way of passively participating in the market's overall strength, exchange-traded funds aren't going to beat the market or outperform their most relevant benchmark. They're merely going to match it, at best. And in an environment where at least a few investors are doing very well by picking the right individual stocks, this limitation can be a little frustrating.

What if, however, you could give yourself a realistic shot at beating the market by owning ETFs rather than diving into individual stock-picking?

As it turns out, there is. So-called leveraged funds can make this happen for you. And perhaps one that would be most familiar and palatable to most investors is the ProShares Ultra S&P 500 (NYSEMKT: SSO). Here's everything interested investors not familiar with this sort of ETF will need to know before making such a trade.

Don't be intimidated by the name. While ProShares uses the word "ultra" for its particular exchange-traded funds of this type, they're just part of a broader category of funds typically referred to as "leveraged." That just means whatever its underlying index does, with some help from futures and options, the fund in question does it to a greater degree. In the case of the ProShares Ultra S&P 500, it moves twice as much as the S&P 500 index (SNPINDEX: ^GSPC), although some leveraged ETFs and mutual funds can move up to 3 times as much as the index they mirror.

The catch? It works both ways. When the S&P 500 is losing ground, ProShares' SSO is falling to the tune of twice as much. That can get real scary, real fast, if it doesn't feel like the selling is going to stop anytime soon. And most investors don't make their best decisions when they're afraid.

Still, these funds have their place for investors who understand all their pros and cons and can manage them appropriately.

There are three big reasons to step into a stake in SSO.