2018’s extended bull market was fueled by expansive growth in the tech sector, which may have been one catalyst for change in the communication sector with the reorganization of the Global Industry Classification Standard (GICS). As technology, consumer and media industries have evolved, the new reclassification is meant to reflect those changes and ProShares is adapting with the expansion of its line of leveraged ETF strategies in this space.
ProShares on Wednesday launched leveraged and inverse strategies for traders seeking tactical investments on the recently minted communications sector. Among the news ETFs are the ProShares Ultra Communication Services Select Sector ETF (NYSEArca: XCOM), ProShares UltraPro Communication Services Select Sector ETF (NYSEArca: UCOM), ProShares UltraShort Communication Services Select Sector ETF (NYSEArca: YCOM) and ProShares UltraPro Short Communication Services Select Sector ETF (NYSEArca: SCOM).
The new ETFs come with a 0.95 percent expense ratio. While this future-oriented corner of the equity market may be attractive for its long-term growth potential, ProShares’ leveraged and inverse communication services ETFs offer the opportunity for investors to seek profit from short-term moves—both up and down—as well.
The new ProShares ETFs will offer investors exposure that corresponds to the +/- 2x and +/- 3x the daily performance of the index, before fees and expenses.
|Ultra Communication Services Select Sector ETF||XCOM||2x|
|UltraPro Communication Services Select Sector ETF||UCOM||3x|
|UltraShort Communication Services Select Sector ETF||YCOM||-2x|
|UltraPro Short Communication Services Select Sector ETF||SCOM||-3x|
Different Multiples for Different Consumers
Ben Fulton, managing director of ProShares’ tactical products business, reiterated ProShares’ commitment to providing knowledgeable investors with a comprehensive set of tools for tactical investing. Moreover, he differentiated the types of investors utilizing the 2x and 3x products.
While the 3x products will certainly cater to the pure traders, the 2x products bring their own unique consumers.
“We’re finding that the traditional sector rotators are looking more to the +/-2x products since it gives exposure to the same features as the +/-3x, which is primarily for the traders and speculators,” said Fulton.
The S&P Communication Services Select Sector Index is one of 11 S&P Select Sector Indices designed to measure the performance of a sector of the S&P 500. The communications sector includes companies involved in diversified telecommunications services; wireless telecommunications services; media; entertainment; and interactive media & services.
Additionally, the sector brings together certain tried-and-true FAANG stocks, media giants and telecom leaders, among others. As of January 16, 2019, the top companies in the Index by weight include Facebook Inc., Alphabet Inc., Netflix, Inc., Activision Blizzard, Inc., and AT&T Inc.