Various markets are chugging along after the recent hiccup. If we continue to experience some short-term volatility ahead, investors can utilize short or inverse exchange traded funds to hedge their positions.
Goldman Sachs has issued a warning on the corporate bond market, oil prices and the broader commodities space, reports Jenny Cosgrave for CNBC.
Specifically, Goldman analysts argue that oil prices could see a double dip and revisit the recent lows over the second half. [Energy ETF Investors Should Brace for ‘New Oil Order’]
“We still expect a decline in the oil price before it recovers, as the price is high relative to current and forecast fundamentals,” analysts led by Christian Mueller-Glissmann at the bank said in a research note. “The reaction of non-OPEC (the Organization of Petroleum Exporting Countries) producers remains limited so far and low-cost producers such as Saudi Arabia, Iraq and Russia are on track to grow production sharply.”
Consequently, ETF investors may be back to inverse options as a way to hedge or capitalize on the fall in oil. For instance, the United States Short Oil (NYSEArca: DNO) tracks the opposite moves of the West Texas Intermediate crude oil futures, DB Crude Oil Short ETN (NYSEArca: SZO) tracks the simple inverse of oil, ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) tries to reflect the two times inverse or -200% daily performance of WTI crude oil, DB Crude Oil Double Short ETN (NYSEArca: DTO) also follows a -200% performance of oil and VelocityShares 3x Inverse Crude (NYSEArca: DWTI) takes the three times inverse or -300% performance of crude oil. [Investors Capitalize on Oil Swings with Leveraged ETFs]
Additionally, Goldman advised clients to stay away from commodities for the rest of the year, with an underweight-rating on oil for the next 12-months.