Alternatively, VDE, which tracks the MSCI U.S. Investable Market Energy 25/50 Index, is slightly more diversified, as the index includes small-cap exposure, and comes with a cheaper 0.10% expense ratio, compared to XLE’s 0.14% expense ratio. Nevertheless, VDE is still top heavy, with a 20.5% tilt toward XOM, 11.1% in CVX and 3.7% in COP.

Similarly, FENY follows the MSCI USA IMI Energy Index, which also includes small-cap exposure, and comes with a cheap 0.12% expense ratio. However, FENY is newer to the market has has less assets under management. The ETF’s top holdings include XOM 25.0%, CVX 13.2% and COP 3.9%.

The energy sector ETFs may also be a good way for investors to realign their equity investment portfolios. After the sell-off in crude oil and producers over the past year, ETF investors with a diversified broad market investment may be underweight the energy sector. At their peak in June 2014, energy producers accounted for 11% of the S&P 500. However, energy companies only make up about 7.2% of the S&P 500 benchmark today. With oil prices rebounding off 13-year lows, investors following a market-cap weighted investment methodology may be under-allocated toward the energy sector.

Investors should also start thinking about positioning in the late-cycle phase. The late-cycle phases had an average duration of about a year and a half, with overall stock market performance of a little over 5% on an annualized basis, according to Fidelity. As the economic recovery matures, the energy sector has done well as inflationary pressures build and late-cycle economic expansion helps support demand.

Nevertheless, for more short-term traders, a poor first quarter result will weigh on the energy sector rebound. If the energy sector was excluded, the blended earnings decline for the S&P 500 would improve to -3.6% from -8.9%.

For those wary of continued volatility in the space, ETF investors can also play the U.S. equities sans oil exposure through targeted options. The ProShares S&P 500 Ex-Energy ETF (NYSEArca: SPXE) tries to reflect the performance of the S&P 500 Ex-Energy Index, which provides exposure to S&P 500 companies with the exception of those included in the Energy Sector.

Alternatively, ETF traders can also hedge against a turn in the energy sector through bearish inverse or short options. For those seeking a hedge against further weakness in the energy sector, the ProShares Short Oil & Gas (NYSEArca: DDG) tries to reflect the inverse, or -100%, daily performance of the Dow Jones U.S. Oil & Gas Index.

The UltraShort Oil & Gas ProShares (NYSEArca: DUG) takes two times the inverse, or -200%, daily performance of the Dow Jones U.S. Oil & Gas Index. More aggressive traders can take a look at the Direxion Daily Energy Bear 3X Shares (NYSEArca: ERY), which reflects three times the inverse, or -300%, daily performance of the energy select sector index. Moreover, the recently launched Direxion Daily S&P Oil & Gas Exploration & Production Bear Shares (NYSEArca: DRIP) takes the -3x, or -300%, daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

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