Oil is coming off its best intraday performance on record Thursday, a move that lifted a slew of energy ETFs and on that could prove meaningful for leveraged fare, such as the MicroSectors U.S. Big Oil Index 3X ETN (NRGU).
The Solactive MicroSectors U.S. Big Oil Index, NRGU’s underlying index, is an equal dollar weighted index designed to track the prices of the 10 U.S. stocks in the oil/energy sector with the largest free-float market capitalization.
Index constituents are Anadarko Petroleum (APC), ConocoPhillips (COP, Chevron (CVX), EOG Resources (EOG), Marathon Petroleum (MPC), Occidental Petroleum (OXY), Phillips 66 (PSX), Pioneer Natural Resources (PXD), Valero Energy (VLO), and ExxonMobil (XOM).
As bullish geared exchange traded note (ETN), NRGU is highly levered to volatile oil prices, but there are indications traders are embracing that volatility as NRGU has been upsized twice in the past week with the latest such move being one of $100 million.
Traders Love NRGU
“The goal of the MicroSectors Big Oil suite of exchange traded notes is to provide sophisticated investors a precise way to trade oil and energy companies with daily resetting leverage or inverse leverage,” said Scott Acheychek, President of REX Shares. “There continues to be strong demand for NRGU despite the substantial sell-off in energy stocks, resulting in the recent upsize.”
The crude oil market has plunged after a sudden fall-off in demand due to the stunted economic activity in the wake of the global viral outbreak. Meanwhile, the price war between Saudi Arabia and Russia added to a spike in output that further expanded a global supply glut. The unbalanced fundamentals recently dragged down U.s. crude oil prices to their lowest level since 2002.
However, the U.S. is prodding Russia and Saudi Arabia to cut supply by as much as 10 million barrels per day in a bid to support prices. If successful, that effort could lead to big near-term gains with NRGU.
NRGU’s bearish counterpart is the MicroSectors U.S. Big Oil Index -3X Inverse ETN (NYSEARCA: NRGD).
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.