Energy traders can look to a new exchange traded note to track a recovery in West Texas Intermediate crude oil futures or capitalize on market moves with two new master limited partnership-related ETNs.
Credit Suisse has launched the X-Links WTI Crude Oil Index ETN (NYSEArca: OIIL), according to a press release. OIIL has a 0.55% expense ratio.
“OIIL’s annual fee rate is 0.55% and its fees are applied in a ‘non-path-dependent’ manner, where each day’s fee is simply the ETN’s value multiplied by the daily prorated amount of the annual fee rate,” Paul Somma, Head of Exchange Traded Notes at Credit Suisse, said in the press release.
The WTI oil ETF will track the Bloomberg WTI Crude Oil Total Return Subindex, which is comprised of West Texas Intermediate crude oil futures contracts.
Potential investors should be aware that since the ETN tracks futures contracts, and not the spot price, traders are exposed to the negative effects of contango when the ETN rolls contracts set to expire. [Positioning for an Oil ETF Rebound? Watch For Contango.]
Nevertheless, OIIL may be a better way for ETN traders to track crude oil futures, compared to the more established iPath Crude Oil Futures ETN (NYSEArca: OIL), especially after the iPath OIL ETN traded at a premium of up to 40% to its net asset value last month. Barclays Bank PLC, the underwriting bank behind the iPath ETN line, recently issued a warning on its OIL ETN and said the high premiums could happen again. OIL was trading at a 23.3% premium to its NAV on Wednesday, according to Morningstar data. [An Oil ETN Trade Shows the Differences to ETFs]
UBS Investment Bank also launched the ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure Index ETN Series B (NYSEArca: MLPQ) and the ETRACS 2xMonthly Leveraged S&P MLP Index ETN Series B (NYSEArca: MLPZ), according to a press release. MLPQ comes with a 0.85% expense ratio and MLPZ has a 0.95% expense ratio.
The two new UBS ETRACS ETNs look like revamped versions of the bank’s ETRACS 2xMonthly Leveraged Long Alerian MLP Infrastructure Index ETN (NYSEArca: MLPL) and the ETRACS 2x Monthly Leveraged S&P MLP Index (NYSEArca: MLPV), which were slated for closure. [Rapid Price Declines Shutter Two Leveraged MLP ETNs]
MLPQ will track the monthly compounded 2x or 200% leveraged performance of the Alerian MLP Infrastructure Index. Meanwhile, MLPZ will take the monthly compounded 2x or 200% leveraged performance of the S&P MLP Index. Unlike many leveraged and inverse ETFs that rebalance on a daily basis, these two leveraged MLP-related ETNs rebalance less frequently, so they may more closely follow their target strategies over longer periods due to diminished compounding issues.
Max Chen contributed to this article.