Oil 3x ETF – Explained & List of Major players

Oil 3x ETFs are leveraged Exchange Traded Funds designed to seek daily investment results, before fees and expenses, of 300% of the performance of the benchmark index that they track. In the case of a bear fund, it is 300% of the inverse of the performance.

Oil is one of the most important commodities in the world playing an important part in some of the biggest industries like chemicals, transport, power, petrochemicals etc. Almost all of the world’s cars run on petrol /gasoline which is derived from crude oil. With such high needs of oil globally, there is an increasing demand for the commodity, which has led the oil rich countries & Oil companies gain magnificently. Hence, also the rising popularity of Oil ETFs, since investors & the market have immense faith in the underlying asset.

However, all such ETFs do not come with a guarantee that the funds will achieve their objective. One needs to be extra cautious, when investing in these leveraged oil ETFs because they include unique risks, characteristics and fees. Any decision should be made only after reading each fund’s prospectus & consulting an investment professional. Leveraged funds are intended for short-term or day-trading and the long-term performance of these funds may differ from the long-term performance of the underlying assets or index. ETFs are one of the more benefit-rich investment vehicles available in the marketplace today. Some of these benefits include tax efficiency, lower ownership costs, liquidity and convenience. ETFs are one of the fastest growing investment products in the worldwide financial marketplace today.

Given below is the list of the Major Companies for Oil 3x ETF –

Direxion Shares- is a pioneer in providing investment solutions to their investors to optimize their portfolio strategies. Their leveraged products offer the opportunity for investors to effectively manage risk and returns in all market conditions. The leveraged ETFs are powerful tools built to help magnify customer perspective, seek opportunities on both sides of the trade, and trade through rapidly changing markets. Direxion is an innovator in its field and has provided the investment community with many of the industry firsts, investment options.

Their leveraged 3x ETFs are classified for investments into:

Domestic Equity – investing into daily large cap, mid cap & small cap bull & bear markets. This segment covers 12 such ETFs, with an average quarterly (standardized) YTD of 4.17% as of 31st March, 2012.

Sector Equity– investing into agriculture, energy, finance, gold, healthcare, natural gas, real estate, retail, semiconductor & technology sectors. This segment covers 44 such ETFs, with an average quarterly (standardized) YTD of 3.25% as of 31st March, 2012.

International Equity– are divided for investments in international markets like Developed & Emerging markets, China, India, Latin America & Russia. This segment covers 28 such ETFs, with an average quarterly (standardized) YTD of 1.18% as of 31st March, 2012.

Fixed Income – comes with a 7-10 & 20 years investment plans. This segment covers 8 such ETFs, with an average quarterly (standardized) YTD of (-0.96)% as of 31st March, 2012.

ProShares – ProShares, part of ProFunds Group, the world’s largest manager of leveraged and inverse funds, have taken exchange traded funds to the next level. The company is a premier provider of alternative ETFs and the country’s fourth most successful exchange traded fund company. Their portfolio manages 132 ETFs, which includes the world’s largest lineup of geared ETFs and provide exposure to U.S. and foreign equities, fixed-income, inflation, commodity, currency and volatility benchmarks.

UltraProShares ETFs seek returns that are either 3x, 2x, -1x, -2x or -3x the return of an index or other benchmark for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely to differ in amount and possibly direction from the target return for the same period.

The ETFs & their YTD as of 30th April 2012 are given below:

UltraPro Dow 30- 27.52%,  UltraPro Midcap 400 – 41.48%, UltraPro QQQ – 68.55%, UltraPro Russell 2000 – 31.56%, UltraPro S&P500 – 37.54%.

Invesco PowerShares is leading the ETF Revolution through its more than 120 domestic and international index-based ETFs and actively managed ETFs, with franchise assets of over $60 billion as of March 31, 2011. They provide a comprehensive array of investment solutions for retail, institutional and high-net-worth clients around the world.  PowerShares ETFs seek to outperform traditional benchmark indices, while providing investors access to an innovative array of focused investment opportunities. PowerShares ETFs trade on all major U.S. stock exchanges, as well as many other prominent exchanges throughout Canada and Europe.

Some of their leveraged 3x ETFs are:

PowerShares DB 3x Long US Dollar Index Futures ETN, DB 3x Short US Dollar Index Futures ETN, DB 3X Long 25+ Year Treasury Bond ETN, DB 3x Japanese Govt Bond Futures ETN, DB 3x Italian Treasury Bond Futures ETN, DB 3x Inverse Japanese Government Bond Futures ETN & DB 3x German Bund Futures ETN.