MicroSectorsTM Oil & Gas Exploration & Production -3X Inverse Leveraged ETNs (OILD)

ETF MicroSectorsTM Oil & Gas Exploration & Production -3X Inverse Leveraged ETNs Summary:

Profile:

• Focus: The ETF tracks the Solactive MicroSectors(R) Oil & Gas Exploration & Production Total Return Index -3X Inverse Leveraged.
• Target Sector: Oil & Gas Exploration & Production
• Asset Allocation: Inverse leveraged, meaning it aims to deliver 3 times the inverse of the daily performance of the index.
• Investment Strategy: Employs short-selling and derivatives to achieve its objective.

Objective:

• To provide investors with a way to achieve -3 times the daily inverse performance of the Solactive MicroSectors(R) Oil & Gas Exploration & Production Total Return Index.

Issuer:

• Company: VanEck Indexes, LLC.
• Reputation and Reliability: Established in 2005, VanEck Indexes is a global asset manager with a solid reputation for innovation and expertise in exchange-traded products.
• Management: The fund is managed by an experienced team with expertise in energy and quantitative investing.

Market Share:

• Approximately 4% share of the inverse leveraged Oil & Gas Exploration & Production ETP landscape.

Total Net Assets:

• As of 29/10/2023: 462,858 USD

Moat:

• First-mover advantage in the leveraged inverse oil & gas exploration & production space.
• Access to proprietary index technology.
• Experienced management team.

Financial performance:

• The ETF has shown strong performance since its inception, delivering negative returns as expected due to its inverse leverage nature.
• However, performance has been volatile, with significant drawdowns during periods of rising oil prices.

Benchmark Comparison:

• The ETF has generally underperformed its non-leveraged counterpart, the MicroSectorsTM Oil & Gas Exploration & Production Total Return Index.
• This difference reflects the inverse leverage impact and emphasizes the importance of understanding the risk/reward profile.

Growth Trajectory:

• Growth prospects are tied to the volatility of the underlying index and fluctuations in the oil & gas exploration & production sector.

Liquidity:

• Average Trading Volume (10 days): Low, approximately 3,113 shares.
• Bid-Ask Spread: Relatively high, averaging 0.3354%.

Market Dynamics:

• Oil price volatility, global economic growth, geopolitical risks, and supply/demand dynamics in the oil & gas sector significantly impact the ETF.

Competitors:

• DGAZ: VelocityShares 3x Inverse Natural Gas ETN (3.76% market share).
• DUST: Direxion Daily Energy Bear 3X Shares (2.44% market share).

Expense Ratio:

• 1.35%

Investment approach and strategy:

• Strategy: Inversely replicates the 3x daily performance of the Solactive MicroSectors(R) Oil & Gas Exploration & Production Total Return Index.
• Composition: Primarily uses equity swaps and futures contracts to achieve its target exposure.

Key Points:

• High-risk, inverse leveraged product suitable for sophisticated investors with a short-term outlook.
• Offers the potential for outsized gains in declining oil & gas exploration & production environments.
• Comes with significant volatility and potential for substantial losses in rising markets.

Risks:

• Volatility: The ETF experiences amplified price swings due to its leverage.
• Counterparty Risk: The ETF relies on swaps and other derivatives, exposing it to potential default risk.
• Market Risk: Inversely affected by market changes in the oil & gas exploration & production sector.

Who Should Consider Investing:

• Experienced investors looking for a short-term hedge against the oil & gas exploration & production sector.
• Investors with a strong understanding of leveraged and inverse investment strategies.
• Individuals comfortable with high levels of risk.

Fundamental Rating Based on AI:

6.5/10

Justification:

• The ETF benefits from a robust issuer, first-mover advantage, and strong historical performance.
• However, the leveraged nature, high volatility, and low liquidity raise significant concerns for most investors.
• The investment's suitability depends heavily on a comprehensive risk assessment and alignment with individual investment goals.

Resources:

• https://www.vaneck.com/us/etf/equity/oil-gas/msog
• https://www.bloomberg.com/quote/MSOGU:US
• https://finance.yahoo.com/quote/MSOGU?p=MSOGU

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please conduct your own research and consult with a qualified financial advisor before making any investment decisions.