An ETF that takes a long position in oil and shorts U.S. stocks rallied 10% on Tuesday on the heaviest trading volume in over a year amid speculation the U.S. could launch military action against Syria.
FactorShares 2X: Oil Bull/S&P500 Bear (NYSEArca: FOL) saw trading volume spike to over 45,000 shares on Tuesday afternoon, compared with average daily volume of only 800 shares the past three months.
The fund is a “leveraged spread ETF” designed for investors who believe crude oil will increase in value relative to large-cap U.S. equities in one day or less, according to provider FactorShares.
The fund establishes a leveraged long position in crude futures, combined with a leveraged short position in E-mini S&P 500 futures. The S&P 500 was down 20 points, or 1.2%, on Tuesday. Crude oil futures rose nearly 3% to touch $109 a barrel on fears the U.S. could hit Syria with a military strike.
FOL is a relatively small ETF with about $1.5 million of assets. The highly specialized fund is certainly designed as a trading vehicle for hedging and speculation.
The firm also manages FactorShares 2X: S&P500 Bull/TBond Bear (NYSEArca: FSE), FactorShares 2X: TBond Bull/S&P500 Bear (NYSEArca: FSA), FactorShares 2X: S&P500 Bull/USD Bear (NYSEArca: FSU) and FactorShares 2X: Gold Bull/S&P500 Bear (NYSEArca: FSG).
The ETFs seek investment results for a single day only, not for longer periods. The returns for a period longer than one day may not track the underlying index due to the impact of compounding the resetting the leverage on a daily basis.
FactorShares 2X: Oil Bull/S&P500 Bear
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.