United States Commodity Funds has expanded on its line of energy-focused exchange traded funds with two new leveraged and inverse options for more aggressive plays on West Texas Intermediate crude oil.
USCF has come out with the United States 3X Oil Fund (NYSEArca:USOU) and the United States 3X Short Oil Fund (NYSEArca:USOD). USOU has a 1.84% expense ratio and USOD has a 2.19% expense ratio.
“Over a decade ago, USCF pioneered the single commodity exchange-traded fund with the launch of the United States Oil Fund (USO). Our new 3X long and 3X short oil funds offer traders and professionals with strong convictions the opportunity to take more concentrated positions in crude oil,” John Love, President and Chief Executive Officer of USCF, said in a note.
The 3x Oil Fund will try to reflect the 3x or 300% daily price movements of WTI light, sweet crude oil while the 3x Short Oil Fund will try to reflect the -3x or -300% daily price movements of WTI crude.
Both funds will achieve their objective by investing in forwards, swap contracts, other oil-related futures contracts and certain options on oil futures contracts that would help generate the leverage/inverse of the benchmark of near month light, sweet crude oil futures contracts traded on the NYMEX.
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Potential traders should keep in mind that these funds will try to seek their leveraged/inverse return for a single day and do not seek to achieve their stated investment objective over a period greater than one day.
“The pursuit of daily leveraged investment goals means that the return of the Fund for a period longer than a full trading day may have no resemblance to 300% of the return of the Benchmark Oil Futures Contract for a period of longer than a full trading day because the aggregate return of the Fund is the product of the series of each trading day’s daily returns,” according to USCF. “For the Fund to maintain a consistent 300% return versus the Benchmark Oil Futures Contract, the fund’s holdings must be rebalanced on a daily basis by buying additional oil Interests or selling oil Interests that it holds.”
Traders should keep in mind that due to the compounding effect of daily rebalancing, the geared ETFs may not perfectly reflect their stated objective over extended periods, especially during more volatile market conditions.
For more information on new fund products, visit our new ETFs category.