After hours: 4:50PM EDT
|Bid||0.00 x 1100|
|Ask||0.00 x 800|
|Day's Range||43.25 - 44.12|
|52 Week Range||29.08 - 82.45|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||-3.53|
|Expense Ratio (net)||1.09%|
While oil prices are surging, the energy sector is being left behind...sort of. The Energy Select Sector Index (IXETR), a widely followed gauge of large-cap U.S. energy stocks, is up 16.80 percent year-to-date. It also means that the large-cap energy index trailing the United States Oil Fund (NYSE: USO), which tracks front-month West Texas Intermediate futures, by a 2-to-1 margin.
Fluctuating oil prices and talks of a trade war, among other things, caused energy sectors stocks to tumble throughout 2018. Although there were reasons to be optimistic at various points throughout the year, the last few months of 2018 were particularly rough: October constituted the worst single month for the sector in the better part of a decade, and the final weeks of the year saw stock prices plummet along with the market overall.
The myriad woes have resulted in huge demand for inverse or leveraged inverse ETFs for investors seeking to make big gains in a short span.
The fund invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund's net assets (plus borrowing for investment purposes). GASX seeks daily investment results worth 300% of the inverse of the daily performance of the ISE-Revere Natural Gas IndexTM. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund's net assets (plus borrowing for investment purposes).
Note in the chart below how energy was beating the market by 20%, but now is trailing by 10%—quite the 30% reversal.ERX (3X Bull Energy) and ERY (3X Bear Energy) can help you hedge or make the bounce-back bet, whichever you opt for. US-China trade war concerns affected crude oil prices as the dispute between the two nations is expected to affect global economic growth. Adding fuel to the fire are the US sanctions against Iran’s oil sector, which affected crude oil prices further.
Given the current certainties and market risks, ETF investors should construct resilient portfolios to participate on any further upside and hedge the downside. On the recent webcast (available On Demand for CE Credit), Potential ETF Strategies for Today’s (and Tomorrow’s) Markets, Sylvia Jablonski, Managing Director and Institutional ETF Strategist for Direxion and Portfolio+ ETFs, outlined a number of global elements that may influence an investor portfolio, such as the U.S. economy entering late-cycle phase, the Federal reserve moving toward monetary policy normalization, rising interest rates, building inflationary pressures, increasing dispersion amongst sectors, and changing geopolitical climate. "If you’re an investor, you have to believe that markets generally rise over time.
While energy stocks have been surging, Direxion data indicate traders have been taking profits in the bullish ERX while adding capital to the bearish ERY. Traders favoring ERY over ERX is notable for several reasons, not the least of which is that the energy sector is entering a time of the year that has been unkind to energy stocks.