I've thought about investing in UPRO, the ProShares UltraPro S&P500 3x leveraged ETF. But, of course, I don't want to invest in it until I have a good understanding of it, including its historical returns, the math behind its leverage, and the assets that it holds.
If I look at the list of daily holdings, I find that by far, the fund's largest holdings by "exposure value" are
- S&P 500 INDEX SWAP CREDIT SUISSE INTERNATIONAL,
- S&P 500 INDEX SWAP SOCIETE GENERALE,
- S&P 500 INDEX SWAP UBS AG,
and so on and so forth. Of course, these swaps don't have a ticker symbol or anything, and if I do a Google search for "S&P 500 index swap", all that comes up is lists of ProShares holdings.
The prospectus for UPRO does contain a little more information:
Swap Agreements — Contracts entered into primarily with major global financial institutions for a specified period ranging from a day to more than one year. In a standard “swap” transaction, two parties agree to exchange the return (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross return to be exchanged or “swapped” between the parties is calculated with respect to a “notional amount,” e.g., the return on or change in value of a particular dollar amount invested in a “basket” of securities or an ETF representing a particular index.
So this makes it sound like an S&P 500 index swap is similar to a stock future. Perhaps UPRO has agreed with these financial institutions that at some future point in time, UPRO will pay the institution $300,000,000 and the institution will pay UPRO $100,000 times value of the S&P 500 index. Something like that.
Is there any way to find out what the details of these index swaps actually are?