Back to top

Image: Bigstock

Leveraged Oil-Energy ETFs Up More Than 50% YTD: Take a Look

Read MoreHide Full Article

The accelerated coronavirus vaccine rollout has helped control the outbreak worldwide and reopen global economies, keeping investors upbeat about the oil and energy sector since the beginning of 2022. The space observed increased demand as economic activities were gradually being restored to the pre-pandemic level.

Adding momentum to the rally was the start of Russia’s invasion of Ukraine. Russian President Vladimir Putin launched a military operation in Ukraine on early Feb 24. Consequently, the global benchmark Brent crude oil rose around 7.3% to surpass the $100 level, for the first time since 2014, on the same day. Russia began an all-out invasion of Ukraine by all routes, including land, air and sea. It is considered the biggest attack launched by a state against another in Europe since World War II, per a Reuters article.

This attack is bumping up oil prices as Russia is the world’s second-largest oil producer. European refineries procure most of their crude oil supplies from Russia. Notably, Russia provides about two-fifths of its natural gas supply to Europe. In fact, Russia emerged as the largest natural gas and oil supplier to the European Union in 2021.

In this regard, UBS analyst Giovanni Staunovo has said that "Russia is the third largest oil producer, and second largest oil exporter. Given low inventories and dwindling spare capacity, the oil market cannot afford large supply disruptions," according to a Reuters article. Also, market experts believe Brent will remain above $100 per barrel unless alternative sources of supplies are made available by OPEC, U.S. shale, or Iran.

Leveraged Oil-Energy ETFs Up More Than 50% YTD

Here we highlight some leveraged oil-energy ETFs that are up more than 50% so far in 2022.

However, investors need to note that these products are extremely volatile and suitable only for short-term traders. These trades can lead to huge losses compared with the traditional funds during turbulent market conditions. Meanwhile, market participants may enjoy higher returns in a short period of time, provided the trend remains in favor, largely due to the compounding effect of these products. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.

MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (NRGU - Free Report) — up 145.3% year to date

The return on the MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (3X ETNs) is linked to three times leveraged participation in the performance of the Solactive MicroSectors U.S. Big Oil Index, compounded daily, minus the applicable fees. With AUM of $1.63 billion, the Direxion Daily S&P Biotech Bear 3X Shares has an expense ratio of 0.95% (read: 5 Top-Performing Leveraged/Inverse ETFs of Q1).

MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs (OILU - Free Report) — up 144.4%

The MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs (3X ETNs) seekw to track investment results that are three times the performance of the MicroSectors Oil & Gas Exploration & Production Index, compounded daily, minus the applicable fees. The MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs has an expense ratio of 0.95% along with AUM of $54.9 million (read: Here's How to Play Rising Energy Sector With Leveraged ETFs).

Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH - Free Report) — up 85.4%

GUSH seeks daily investment results, before fees and expenses, of 200% of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. With AUM of $1.02 billion, the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares has an expense ratio of 1.01% (read: 5 Leveraged ETFs That Gained More Than 30% in March).

Direxion Daily Energy Bull 2X Shares (ERX - Free Report) — up 80.7%

The Direxion Daily Energy Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the Energy Select Sector Index. With AUM of $705.5 million, the Direxion Daily Energy Bull 2X Shares has an expense ratio of 0.95%.

ProShares Ultra Oil & Gas (DIG - Free Report) — up 78.8%

ProShares Ultra Oil & Gas seeks daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones U.S. Oil & Gas Index. DIG has AUM of $217.7 million and charges an expense ratio of 0.95%.

Direxion Daily Oil Services Bull 2X Shares (ONG - Free Report) — up 52.3%

The Direxion Daily Oil Services Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the MVIS US Listed Oil Services 25 Index. ONG manages $14.2 million in assets and has an expense ratio of 1.07%.