TalkingPoints: S&P Leverage and Inverse Indices

1. What are leverage and inverse indices and why are they important?

The S&P Leverage and Inverse Indices aim to replicate the daily performance of their underlying indices with a constant multiplicative factor, positive or negative, with or without embedded borrowing and lending costs. They offer market participants short-term trading tools for hedging and leveraging purposes. They also provide benchmarks for leverage and inverse products, such as leverage and inverse mutual funds, exchange-traded funds, exchange-traded notes, etc.

2. What are the underlying securities of leverage and inverse indices?

The S&P Leverage and Inverse Indices can measure equities and futures indices. Examples of possible underlying equity indices would include the S&P 500^® and the Dow Jones Industrial Average^®.

The underlying futures indices could include equity futures indices, currency futures indices, commodity futures indices, and VIX^® futures indices, such as  the Dow Jones Industrial Average Futures Index, S&P U.S. Dollar Futures Index,  S&P GSCI Crude Oil, and S&P 500 VIX Short-Term Futures Index.

3. What return types are there for leverage and inverse indices?

For equity-based leverage and inverse indices, the index return types follow the underlying indices and can be measured in price return, total return, or net total return.

For futures-based leverage and inverse indices, both excess return indices and total return indices are calculated. The difference in excess return and total return is explained in question 4.

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