ProShares UltraShort S&P500: SDS vs Shorting SPY

Sell short 20 SPY at a hypothetical $500. Or buy 250 SDS at a hypothetical $20. Both orders are bearish on the S&P 500. On the first day each carries $10,000 of short index exposure, and each ties up $5,000 of your own money, so on paper SDS vs shorting SPY looks like a coin toss.

They part ways in the account each needs, in what you pay to hold them, and in how the exposure changes once the market moves against you for more than a day.

What does each position actually hold?

SPY is the SPDR S&P 500 ETF Trust, a unit investment trust with State Street Global Advisors Trust Company as trustee, and State Street’s fund page lists its distributions as quarterly. Short it and you have borrowed shares of that trust and sold them. You owe those shares back.

SDS is ProShares UltraShort S&P500. Its sponsor aims for twice the opposite of the index’s move each trading day, measured before fees and expenses, and makes no promise for longer holds. Its holdings are index swaps with banks, an E-mini futures position and Treasury bills (fund page, as of November 2026). You own shares of a fund outright, with no lender involved.

How much money does each take up front?

The 150% figure comes from the Federal Reserve’s Regulation T, 12 CFR 220.12(c). It counts the proceeds of the sale, which is why your own share lands at half the position. Brokers can ask for more.

SDS needs none of that if you pay cash. Buy it on margin and FINRA Regulatory Notice 09-53 raises the maintenance requirement in line with the fund’s leverage, capped at 100% of its value, so a -2x fund carries roughly double the 25% charged on an ordinary long ETF.

Where does the short get a margin call?

This is a sum you can run before you sell. The account holds $15,000 in credit. Your equity is that credit minus what it costs to buy the 20 shares back, and the 30% maintenance floor rises with the price.

Below that price, nothing happens. Above it, you deposit cash or the broker buys shares to cover. An SDS holder has no such line, because a fully paid position has no lender to protect.

What does the short cost while you wait?

Start with the borrow. Before your broker can accept the short sale, SEC Rule 203(b) requires it to have reasonable grounds to believe the shares can be borrowed, and that locate is recorded before the order goes through. The broker decides whether to charge a fee for it, and the rate can change daily. The lender can also recall the shares, which can force you out at a bad moment.

Then the dividends. The SEC’s investor page on short selling says that if the borrowed stock pays a dividend, you pay it to the lender. SPY distributes quarterly. Hold a short across an ex-dividend date and the payment comes out of your cash.

SDS carries an expense ratio, listed on its ProShares page and deducted from the fund’s value daily. There’s no borrow and no dividend bill.

What is the most each can lose?

SDS: the $5,000. A fund’s value stops at zero.

The short has no ceiling. SPY can rise without limit, and every dollar it rises costs 20 dollars, so a market that grinds higher for months, or a sharp breakout to new highs that carries straight through your stop on a gap, can run the loss well past the $5,000 you deposited, which is the scenario the margin call above exists to cut short.

On a single bad day they match.

The short came out of a losing day larger than it went in. SDS came out smaller.

Why does the daily reset change the comparison?

A short holds a fixed number of shares. Twenty shares stay twenty shares until you buy them back, so your exposure in dollars floats with the price: it grows as SPY rallies against you and shrinks as SPY falls in your favor. SDS does the opposite every evening. It resets to -2x of whatever it is worth at that close, so after a losing day it bets less and after a winning day it bets more.

That reset is what keeps SDS from going below zero. It also makes it drift on choppy paths.

The index ended slightly lower, so the short made 6 while SDS lost 2. Stretch that over a month and the gap widens; SDS through a choppy month works a full sideways stretch session by session, and the leveraged ETF decay calculator runs any path you type in.

What happens on a day SPY falls 10%?

SEC Rule 201 applies to every NMS stock, which includes exchange-listed ETFs like SPY. Once a security trades 10% or more under the prior day’s close, trading centers must block short sales priced at or below the current national best bid, and that restriction runs through the end of the session and all of the next one.

So the short you already hold is fine. Adding to it is harder: your new short order can execute only above the bid, which in a falling market means waiting for an uptick or resting an offer that may not fill.

Buying SDS is a purchase. The price test doesn’t touch it. Neither does it touch buying SPY to cover, so taking profits on the short works as usual.

Which one fits which trader?

Short SPY if you already run a margin account, want exposure that does not drift, and will hold through weeks of chop where a reset fund would bleed. Watch the dividend dates, check the borrow status before the entry, and set the buy-to-cover stop in advance, because the loss has no floor.

Buy SDS if the account is a cash account or an IRA, if you want the worst case fixed at the money you put in, and if the view is measured in days. Size it at half the exposure you want, since the fund doubles it, and re-check that size as the index moves. For a short with a fixed cost and a deadline instead, SDS against S&P 500 puts runs the same bet through options, and the inverse ETF list puts the -1x and -3x S&P 500 funds next to SDS if you want less or more leverage.