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5 Leveraged Energy ETFs to Play Russia-Ukraine Tensions
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Oil prices hit a seven-year high of $98 after Russia recognized the independence of Donetsk and Luhansk and signed a decree calling for forces to enter the two regions, per a CNBC article. Russia is energy-rich. And Europe is highly dependent on Russia for energy, importing about 40% of its energy requirement.
U.S. President Biden publicly called Russia's move to deploy troops to separatist regions of Ukraine "the beginning of a Russian invasion" of the region. The United States and the United Kingdom announced the first tranche of sanctions on Russian financial institutions, sovereign debt and wealthy individuals. Germany too halted the approval of the gas pipeline Nord Stream 2 after Russia’s actions.
Such series of events triggered the fear of supply chain issues and energy crisis. If Russia tensions increase, gas prices in Europe — which soared to new highs last year — will go up further, per Capital Economics, quoted on a CNBC article. Russia is the provider of about 35% of Europe’s gas. No wonder, United States Brent Oil Fund, LP (BNO - Free Report) has added 4% past week and United States Natural Gas Fund, LP (UNG) is up 2%.
In any case, oil prices have been rising since the beginning of 2022. The upside in the crude oil prices was triggered by a variety of factors like easing Omicron variant concerns, protests in Kazakhstan and outages in Libya causing supply shortages and less OPEC+ output.
Output from the Organization of the Petroleum Exporting Countries, Russia and allies, collectively called OPEC+, is falling short from the growth in demand. OPEC+ compliance with oil output cuts was around 130% in January (according to a Reuters article). Nigeria and Iraq have said the strategy employed by the OPEC+, to boost oil production gradually is enough to balance the market and there is no need for a hurry to ramp up production.
Hence, leveraged energy ETFs are likely to be intriguing plays currently. Below, we have highlighted those leveraged ETFs in detail:
ProShares Ultra Oil & Gas ETF seeks to deliver twice (2X or 200%) the daily performance of the Dow Jones U.S. Oil & Gas Index. The index measures the performance of the energy companies including oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. DIG charges 95 bps in fees per year.
Direxion Daily Energy Bull 2X Shares (ERX - Free Report)
Direxion Daily Energy Bull 2X Shares creates two times leveraged position in the Energy Select Sector Index. Expense ratio of ERX is 1.00%.
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH - Free Report)
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares offers two times exposure to the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The expense ratio of GUSH is 1.14%.
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report)
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. Expense ratio comes in at 0.95%.
MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETN (OILU - Free Report)
MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETN is linked to three times leveraged performance of the MicroSectors Oil & Gas Exploration & Production Index. The index provides exposure to the large-capitalization companies that are domiciled and listed in the United States and that are active in the exploration and production of oil and gas. MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETN charges investors 95 bps in annual fees and expenses.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bullish on the energy sector for the near term, either of the above products can be an interesting choice.
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5 Leveraged Energy ETFs to Play Russia-Ukraine Tensions
Oil prices hit a seven-year high of $98 after Russia recognized the independence of Donetsk and Luhansk and signed a decree calling for forces to enter the two regions, per a CNBC article. Russia is energy-rich. And Europe is highly dependent on Russia for energy, importing about 40% of its energy requirement.
U.S. President Biden publicly called Russia's move to deploy troops to separatist regions of Ukraine "the beginning of a Russian invasion" of the region. The United States and the United Kingdom announced the first tranche of sanctions on Russian financial institutions, sovereign debt and wealthy individuals. Germany too halted the approval of the gas pipeline Nord Stream 2 after Russia’s actions.
Such series of events triggered the fear of supply chain issues and energy crisis. If Russia tensions increase, gas prices in Europe — which soared to new highs last year — will go up further, per Capital Economics, quoted on a CNBC article. Russia is the provider of about 35% of Europe’s gas. No wonder, United States Brent Oil Fund, LP (BNO - Free Report) has added 4% past week and United States Natural Gas Fund, LP (UNG) is up 2%.
In any case, oil prices have been rising since the beginning of 2022. The upside in the crude oil prices was triggered by a variety of factors like easing Omicron variant concerns, protests in Kazakhstan and outages in Libya causing supply shortages and less OPEC+ output.
Output from the Organization of the Petroleum Exporting Countries, Russia and allies, collectively called OPEC+, is falling short from the growth in demand. OPEC+ compliance with oil output cuts was around 130% in January (according to a Reuters article). Nigeria and Iraq have said the strategy employed by the OPEC+, to boost oil production gradually is enough to balance the market and there is no need for a hurry to ramp up production.
Hence, leveraged energy ETFs are likely to be intriguing plays currently. Below, we have highlighted those leveraged ETFs in detail:
ETFs in Focus
ProShares Ultra Oil & Gas ETF (DIG - Free Report)
ProShares Ultra Oil & Gas ETF seeks to deliver twice (2X or 200%) the daily performance of the Dow Jones U.S. Oil & Gas Index. The index measures the performance of the energy companies including oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. DIG charges 95 bps in fees per year.
Direxion Daily Energy Bull 2X Shares (ERX - Free Report)
Direxion Daily Energy Bull 2X Shares creates two times leveraged position in the Energy Select Sector Index. Expense ratio of ERX is 1.00%.
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH - Free Report)
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares offers two times exposure to the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The expense ratio of GUSH is 1.14%.
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report)
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. Expense ratio comes in at 0.95%.
MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETN (OILU - Free Report)
MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETN is linked to three times leveraged performance of the MicroSectors Oil & Gas Exploration & Production Index. The index provides exposure to the large-capitalization companies that are domiciled and listed in the United States and that are active in the exploration and production of oil and gas. MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETN charges investors 95 bps in annual fees and expenses.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bullish on the energy sector for the near term, either of the above products can be an interesting choice.