The problems in the Middle East have riled the markets, and anxious investors have been rushing into safer bets. While safe-have investments continue to draw attention, there are other exchange traded fund (ETFs) options that could be used to capitalize on the situation.
Libya produces 1.6 million barrels of crude oil per day, or 3% of global oil output, and civil unrest has shut down half of the country’s oil production, writes Matthew D. McCall for IndexUniverse. Consequently, oil prices have been trading higher on the disruptions. Meanwhile, equities and other risky assets have been getting a beating. [Middle East ETFs Tumble Amid Spreading Unrest.]
Still, investors may protect themselves from a range of alternative ETFs, including futures-based or equities-based exposure to the energy sector, safe-haven investments like gold or fixed-income funds and even currency ETFs. For the more experienced trader, volatility funds or inverse ETFs may also be used to capitalize on market’s movements.
The United States Oil Fund (NYSEArca: USO) and the United States Brent Oil Fund (NYSEArca: BNO) are both futures-based oil ETFs that have been doing quite well in the past week. Investors may also take a look at other energy plays like United States Gasoline ETF (NYSEArca: UGA), United States Heating Oil ETF (NYSEArca: UHN) or SPDR Energy ETF (NYSEArca: XLE).
The SPDR Gold ETF (NYSEArca: GLD) remains a popular play on the traditional gold safe-haven asset. The iShares Silver Trust (NYSEArca: SLV) is an alternative to gold.
Fixed-income securities like Vanguard Total Bond Market ETF (NYSEArca: BND) that include highly rated countries and corporations may also be used in times of political unrest. In addition, Rydex CurrencyShares Japanese Yen ETF (NYSEArca: FXY) and the Rydex CurrencyShares Swiss Franc ETF (NYSEArca: FXF) both cover two currencies that have held up in times of uncertainty.
When the broader market plummets, investors may also use inverse ETFs such as the ProShares Short S&P 500 ETF (NYSEArca: SH), which moves in the opposite direction of the daily movement of the S&P 500 Index. Additionally, the higher market volitiilty is also reflected in the CBOE Volatility Index, or VIX, which are covered by iPath S&P 500 Short-Term Futures ETN (NYSEArca: VXX) and the ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY). [Middle East ETFs: Volatility Could Rule.]
For more information on the Middle East, visit our Middle East category.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.