• About
  • Privacy Policy
  • Terms
  • Contact
Friday, January 27, 2023
Financial Eye News
  • Home
  • Markets
    • Stock Market News
    • Commodities
    • Forex
    • Renewables
  • Cryptocurrency
    • Ultimate Guide to Crypto
  • Business
    • News
    • Companies
    • Technology
    • Climate
    • Politics
  • Reports
    • Ultimate Guide to Crypto
  • VideosNew
No Result
View All Result
  • Home
  • Markets
    • Stock Market News
    • Commodities
    • Forex
    • Renewables
  • Cryptocurrency
    • Ultimate Guide to Crypto
  • Business
    • News
    • Companies
    • Technology
    • Climate
    • Politics
  • Reports
    • Ultimate Guide to Crypto
  • VideosNew
No Result
View All Result
Financial Eye News
No Result
View All Result

Best (and Only) Inverse Oil ETF for Q2 2022

March 19, 2022
in Cryptocurrency
Reading Time: 5 mins read
51 0
ADVERTISEMENT

Inverse oil exchange-traded funds (ETFs), which are leveraged and can be highly risky, seek to short either a single energy commodity or a combination of several energy commodities. Examples of the types of commodities typically shorted by these ETFs include crude oil, gasoline, and heating oil.

These ETFs gain when prices of the underlying oil-based commodities fall, which can occur due to either a drop in global demand or an increase in global supply. Oil prices have rebounded significantly since early 2020, when the impact of the coronavirus pandemic helped drive oil prices into negative territory. Russia’s recent invasion of Ukraine has triggered a spike in oil prices more recently, pushing the price of a barrel of crude oil past $100 for the first time since 2014. Considering the dramatic climb in oil prices, it’s no surprise that inverse oil ETFs have experienced steep declines.

Key Takeaways

  • The best (and only) inverse oil exchange-traded fund (ETF) is SCO.
  • Oil prices have risen faster than the broader U.S. stock market over the past year.
  • SCO provides 2× daily short exposure to crude oil prices.

The U.S. inverse oil ETF discussed in more detail below is highly leveraged. Leveraged ETFs can generally be identified by the “2×,” “UltraShort,” “3×,” or “Double” label within the fund’s name. These funds use financial derivatives and debt to amplify returns; therefore, they are considered especially risky.

They are used mainly by highly sophisticated investors who have experience with the heightened volatility often associated with energy commodities and leveraged ETFs. By combining both inverse and leverage strategies, inverse leveraged ETFs are especially complex and risky instruments and should be avoided by less sophisticated investors.

Leveraged ETFs can be riskier investments than non-leveraged ETFs given that they respond to daily movements in the underlying securities that they represent, and losses can be amplified during adverse price moves. Furthermore, leveraged ETFs are designed to achieve their multiplier on one-day returns, but you should not expect that they will do so on longer-term returns. For example, a 2× ETF may return 2% on a day when its benchmark rises 1%, but you shouldn’t expect it to return 20% in a year when its benchmark rises 10%. For more details, see this U.S. Securities and Exchange Commission (SEC) alert.

Below, we look at one of the only inverse oil ETFs that trades in the U.S.: the ProShares UltraShort Bloomberg Crude Oil (SCO) ETF. There is a second U.S. inverse oil ETF, the MicroSectors Oil & Gas Exploration & Production -3x Inverse Leveraged ETN (OILD), which is very small and provides 3x inverse leverage. However, with an inception date of Nov. 8, 2021, it does not have a long enough history to be included in this article, which ranks ETFs on 1-year trailing performance. Oil prices, as measured by the Bloomberg Composite Crude Oil Subindex, have risen 66.7% over the past year, over four times the S&P 500’s total return of around 16.4%, as of Feb. 28, 2022.

However, neither the S&P 500 nor the price of oil is a proper benchmark for SCO, which is designed to meet performance goals over a single day, not over longer periods of time. SCO offers daily short exposure to crude oil prices through the use of futures contracts. It does not short stocks of oil companies. All numbers below are as of Feb. 28, 2022.

Inverse ETFs can be riskier investments than non-inverse ETFs because they are only designed to achieve the inverse of their benchmark’s one-day returns. You should not expect that they will do so on longer-term returns. For example, an inverse ETF may return 1% on a day when its benchmark falls -1%, but you shouldn’t expect it to return 10% in a year when its benchmark falls -10%. For more details, see this SEC alert.

  • Performance Over One-Year: -71.9%
  • Expense Ratio: 0.95%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 3,393,870
  • Assets Under Management: $174.4 million
  • Inception Date: Nov. 24, 2008
  • Issuer: ProShares

SCO is structured as a commodity pool, a private investment tool structured to combine investor contributions for trading futures and commodities markets. The ETF seeks daily investment returns, before fees and expenses, that are two times the inverse (-2×) of the daily performance of the Bloomberg Commodity Balanced WTI Crude Oil Index, an index of crude oil futures contracts. The fund takes short positions on oil futures contracts, not the spot price of oil. It is currently short futures that expire in March 2022, June 2022, and December 2022. SCO may be used by sophisticated investors with a bearish short-term outlook for crude oil. The ETF’s leverage is reset on a daily basis, resulting in returns that are compounded when held for multiple periods. As mentioned, investors with a low tolerance for risk or with a buy-and-hold strategy should avoid this fund.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Source: Investopedia

ADVERTISEMENT
Share6Tweet4Share1SendShareSend

Related Posts

Cryptocurrency

Do Kwon’s New Terra Revival Plan Fights for Support as Trust Challenge Remains

May 17, 2022
Cryptocurrency

Quantum Simulations Predict that Merchant Crypto Adoption Could Spread in ‘Cliques’

April 19, 2022
Cryptocurrency

Bitcoin Maintains Dominance Despite Massive Proliferation of Altcoins

April 19, 2022
Cryptocurrency

First Australian Bitcoin ETF Comes to Cboe, 40 Crypto Players Send a Letter to EU + More News

April 19, 2022
Cryptocurrency

IMF’s DeFi Governance Recommendations Include These Two Steps

April 19, 2022
Cryptocurrency

Moonbirds Collection Faces Criticism After User Wins 50+ NFTs During Raffle

April 19, 2022

Popular Stories

  • AIG to launch cut-price IPO of life and asset management unit

    48 shares
    Share 19 Tweet 12
  • EY boss targets $10bn boost from Silicon Valley tie-ups after break-up

    32 shares
    Share 13 Tweet 8
  • Tesla delays plan to restore Shanghai output to pre-lockdown levels -memo

    32 shares
    Share 13 Tweet 8
  • TV production giant Banijay to go public via Arnault-backed Spac

    30 shares
    Share 12 Tweet 8
  • Nio to Invest $32.8M Building R&D Labs in Shanghai By Financial Eye

    30 shares
    Share 12 Tweet 8
ADVERTISEMENT

Latest News

Taylor Swift Fans Sue Ticketmaster’s Parent Company

December 5, 2022

Fisker trades down following price cut at Citi By Financial Eye

December 5, 2022

UAW president faces run-off election as reformers make gains

December 5, 2022

Felipe Valls, 89, Whose Cuban Restaurant Became a Political Hub, Dies

December 5, 2022

Longroad buys 98-MW solar farm in California

December 5, 2022
Facebook Twitter LinkedIn

Financial Eye is one of the most trusted news sources for Financial News, global news and local USA news, we provide the news from the most trusted sources.

LEARN MORE »

Recent News

  • Taylor Swift Fans Sue Ticketmaster’s Parent Company
  • Fisker trades down following price cut at Citi By Financial Eye
  • UAW president faces run-off election as reformers make gains

Sections

  • Business
  • Climate
  • Commodities
  • Companies
  • Cryptocurrency
  • Cryptocurrency
  • Forex
  • Green Energy
  • Latest Financial News
  • News
  • Politics
  • Stock Market News
  • Technology
  • Videos

© 2022 Financial Eye News Media

No Result
View All Result
  • Home
  • Markets
    • Stock Market News
    • Commodities
    • Forex
    • Renewables
  • Cryptocurrency
    • Ultimate Guide to Crypto
  • Business
    • News
    • Companies
    • Technology
    • Climate
    • Politics
  • Reports
    • Ultimate Guide to Crypto
  • Videos

© 2022 Financial Eye News Media

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Subscribe To Our Daily News Round-Up.

The top ten most-read stories direct to your inbox

You have Successfully Subscribed!

You have Successfully Subscribed!

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.