ProShares has added the first and only triple leveraged and inverse crude oil-related exchange traded funds, allowing energy traders to obtain geared exposure to the commodity through the efficient ETF investment vehicle.
On Monday, ProShares rolled out the ProShares UltraPro 3x Crude Oil ETF (NYSEArca: OILU) and ProShares UltraPro 3x Short Crude Oil ETF (NYSEArca: OILD). Both new funds come with a 0.95% expense ratio.
“With OILU and OILD, investors can, for the first time, obtain daily 3x and -3x exposure to crude oil with the liquidity, transparency and cost-effectiveness of ETFs,” Michael L. Sapir, chief executive officer of ProShare Capital Management, said in a note. “We are pleased to provide these additional investment choices to knowledgeable investors who pursue tactical strategies.”
OILU and OILD will try to reflect the daily performance that is 3x and -3x, respectively, of the underlying Bloomberg WTI Crude Oil Subindex. The two ETFs will gain exposure to the benchmark by investing in listed futures contracts for West Texas Intermediate sweet, light crude oil futures contracts.
The ETF provider will utilize a mathematical approach to investing that determines the type, quantity and mix of investment positions the provider believes should produce daily returns consistent with their 3x or -3x objective.
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.