Get Alternate Exposure to Soaring Oil Prices With This ETF

Bullish oil traders have been spoiled for choice given the recent run in crude prices. Whether it’s the commodity itself, mining, or ancillary services pertinent to the oil industry, there’s a plethora of opportunities available for the oil bulls.

Speaking of oil services, traders may want to look at the Direxion Shares ETF Trust – Direxion Daily Oil Services Bull 2X Shares (ONG). With its extra leverage, the fund seeks 200% of the performance of the MVIS US Listed Oil Services 25 Index (MVOIHTR).

The index includes companies that have common stocks or depositary receipts listed on a U.S. stock exchange and that provide services to the oil industry. To be eligible for initial inclusion in the index, companies must generate at least 50% of their revenues from providing services to upstream oil companies, such as those engaged primarily in providing oil equipment, oil services, or oil drilling.

Of the largest 50 such stocks by full market capitalization, the top 25 by free-float market capitalization and three-month average daily trading volume are included in the index. So far this year, the fund gained close to 75% before oil prices took a breather, falling to just under 50%, which is still an astounding performance figure.

ONG Chart

As Oil Goes, Oil Services Follow

Oil services will obviously go as oil prices go. So far, this is benefiting bullish bets even despite the latest weakness in prices as negotiations between Russia and Ukraine could ease a supply crunch that occurred when Western sanctions hit Russia.

From a fundamental perspective, there’s positive signs for midstream companies. A reduction in debt and a re-emphasis on cash flow is helping to make these companies more financially stable.

“Geopolitical developments this year have reinforced our positive outlook on the sector,” said Mizuho analyst Gabriel Moreen. “Commodity markets have tightened, cash flow improvements have been more rapid than we’d expected, and management teams are making the right strategic moves around capital—with distribution increases, share buybacks, and deleveraging.”

For more news, information, and strategy, visit the Leveraged & Inverse Channel.