Cannot trade SSO?

What to do if trading SSO is not possible.

Unfortunately, SSO cannot be traded by non-proffessional traders from the European Union. Since 2018 EU residents can’t trade US-domiciled ETFs because of EU legislation that most US-registered ETFs cannot comply with.

Fortunately, there is the alternative to use the buy and sell signals generated by SPW to trade with ETFs nominated in Euros that are available in the EU. There are quite a few of these, but we will focus on two of them:

  • Xtrackers S&P 500 2x Leveraged Daily Swap UCITS ETF 1C (XS2D). This leveraged ETF offers similar performance to SPW with SSO, achieving an 18% CAGR and a 25% maximum drawdown.
  • Vanguard S&P 500 UCITS ETF USD Accumulation (VUAA.DE). This non-leveraged ETF is ideal for risk-averse investors. You should expect a lower CAGR but also a smaller drawdown (8%) compared to XS2D. Note that VUAA’s performance data covers a shorter period.

Because, XS2D, uses swaps to track the S&P 500, it has a very good accuracy in following the index’s value. Trading XS2D with SPW achieves a significant improvement over a buy and hold strategy on the S&P 500.

The second option, VUAA.DE, is provided for risk-adverse investors that are willing to sacrifice returns in exchange for smaller capital fluctuations. VUAA.DE is not leveraged and is based of a full replication of the S&P 500 index. It uses to the profits to accumulate more stocks.

Using SPW signals to trade VUAA results in a CAGR of 18% with a maximum Drawdown of 8%. Please note that VUAA performance is calculated from 2020 as compared to 2010 for XS2D, so the performance figures may be deceitful. On the long run, trading VUAA is expected to achieve lower CAGR than XS2S, because the latter is leveraged.

The PnL figure shows that SPW mostly tracks the SP 500 in the uptrend, but later surpasses it by staying out of the market when things get choppy. Not surprisingly, the following figure shows that using SPW to trade VUAA achieves an maximum drawdown of 8% vs. 34% for SP 500:

Please be aware that European Markets open earlier than in the USA, so any orders must be placed before the Euopean Market open.