The performance of crude oil futures is different than the performance of physical crude oil market or the spot price. The underlying index is considered a “rolling index” where it does not take physical delivery but rolls contracts over a period of five business days in certain months. Each day, approximately 20% of each rolling futures position that is included in the month’s roll is rolled, increasing from 0% to 20%, 40%, 60%, 80% and finally 100%.
ProShares also offers 2x and -2x crude oil ETF plays. The ProShares Ultra Bloomberg Crude Oil (NYSEArca: UCO) takes two times or 200% daily performance of WTI crude oil and the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) tries to reflect the two times inverse or -200% daily performance of WTI crude oil.
The new 3x and -3x WTI ETFs are the first and only leveraged and inverse ETFs of their kind. Exchange traded product investors may find they are similar to the exchange traded note options that have recently launched in the wake of the delisting of popular VelocityShares 3x Long Crude ETN (NYSEArca: UWTI) and VelocityShares 3x Inverse Crude (NYSEArca: DWTI).
Specifically, UBS and ProShares rolled out the UBS ETRACS – ProShares Daily 3x Long Crude ETN (NYSEArca: WTIU) and UBS ETRACS – ProShares Daily 3x Inverse Crude ETN (NYSEArca: WTID) back in January. Additionally, the two new leveraged/inverse ETFs will be going up against Citigroup’s VelocityShares 3X Long Crude Oil ETN (NYSEArca: UWT) and the VelocityShares 3X Inverse Crude Oil ETN (NYSEArca: DWT), two copies of the original UWTI and DWTI that were added the day the two originals were moved into the OTC market.
For more information on new fund products, visit our new ETFs category.