Crude Oil is a global commodity that enjoys a fair amount of price volatility triggered by the fundamentals of supply and demand, by geopolitical events in major producing regions of the world or simply by economic hiccups such as the banking crisis of 2008 where oil prices plummeted from $145 a barrel to about $36 a barrel. Investing in oil has never been easier thanks to a rich oil ETF list that provides investors with direct exposure to crude oil or to any sector that benefits directly or indirectly from the price of oil and gas whether it be exploration and production companies or drilling and field services companies . For those investors who are looking to hedge their investment in oil and gas stocks or to capitalize on the downside of oil prices following a run, the following 2 Short oil ETFs are yours to consider:
United States Short Oil Fund ETF ( NYSEArca: )
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MER: 0.95%
The United States Short Oil Fund seeks to inversely replicate in percentage terms the changes on the spot price of WTI light sweet crude oil as measured by the changes in the price of the futures contract traded on the New York Mercantile Exchange. NYMEX is the world’s most liquid forum for crude oil trading and the world’s largest-volume futures contract trading on the physical commodity. DNO ETF began trading on Sep 24, 2009.
ProShares Short Oil & Gas ETF ( NYSEArca: )
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MER: 0.95%
The ProShares Short Oil & Gas ETF seeks to offer investors, before fees, the inverse of the daily performance of the Dow Jones US Oil & Gas Index. By buying DDG, you are basically shorting a basket of US equities in the energy sector which include companies such as Exxon, Chevron, Schlumberger and ConocoPhillips. The index is largely composed of oil and gas producers and oil equipment, services and distribution companies. Contrary to DNO which allows you to short crude oil, DDG allows you to short the equity of companies that are either directly or indirectly impacted by the price of oil and natural gas. The DDG ETF first appeared in June of 2008.
DNO is the perfect hedge against falling oil prices
The bottom line is that both short oil ETFs DNO and DDG offer investors a way to manage their exposure to energy by hedging against a pullback in oil prices. These Short oil ETFs also allow investors to short oil as well as energy stocks which move in step with oil and gas prices. Moreover, any worries about the state of the global economy will be reflected in oil prices which translates into DNO and DDG going higher. So as an added bonus, these short oil etfs can serve as a hedge against uncertainty in the markets since commodities are first to be hit. For the traders amongst you who are looking for leveraged ETFs, you can find a double short oil ETF, a double short oil stocks ETF and a triple short oil stocks ETF as well for exploiting sharp moves in oil prices when volatility is at its highest.
Disclaimer: The information provided is as of the date above and subject to change, and it should not be deemed a recommendation to buy or sell any security. Trading involves substantial risk and may not be right for everyone.