One of the best one day performers on Wednesday in exchange traded funds was FactorShares 2X: Oil Bull/S&P 500 Bear (NYSEArca: FOL), which rallied over 11%. The ETF tracks the spread between daily returns of crude oil and the S&P 500.
Crude oil gapped up on the open yesterday as futures eclipsed the $100 a barrel mark and oil related ETFs such as U.S. Oil Fund (NYSEArca: USO), PowerShares DB Oil (NYSEArca: DBO) and U.S. 12 Month U.S. Oil Fund (NYSEArca: USL) for instance traded at their highest levels since July. [Oil ETFs Rally]
The S&P 500 spent most of the early day in negative territory before rallying, and then plunged in the final hour, closing near the lows of the day and down 1.66%. With crude oil substantially on the day and the S&P 500 closing lower, FOL was indeed a winner and the 2 times daily leverage simply magnifies the returns from a daily standpoint. [Spread ETF]
This and other FactorShares products may appeal to those managers that are looking to make a “macro” type call across asset classes and believe that if one asset class rallies, it will lead to weakness in another and vice versa.
That said, rather complex bets that would normally entail using futures, options, margin, and short selling, can be enacted with one trade via a FactorShares ETF such as FOL, and potentially used as a speculative trade or even a portfolio hedge.
Being still somewhat new to the ETF marketplace, having debuted in February of this year, FOL does not trade a ton of volume on a regular basis (average daily volume is only 3,200 shares) but due to the nature of the underlying assets tracked, real underlying liquidity is present and portfolio managers can establish positions of meaningful size if the trades are executed properly.
FactorShares 2X: Oil Bull/S&P 500 Bear