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

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

Profile

Target Sector: Oil & Gas Exploration & Production

Asset Allocation: 100% Equity

Investment Strategy: Inversely leverages the Solactive MicroSectors Oil & Gas Exploration & Production Index by -300%

Objective: To achieve a return that is -3 times the daily performance of the Solactive MicroSectors Oil & Gas Exploration & Production Index.

Issuer

Issuer: VanEck

Reputation and Reliability: VanEck is a reputable global investment manager with over 35 years of experience and over $86 billion in assets under management.

Management: VanEck has a team of experienced professionals with expertise in various asset classes, including commodities and energy.

Market Share

Market Share: NRGU is the only 3x inverse levered ETN focused on the oil and gas exploration and production sector.

Total Net Assets

Total Net Assets: $4.4 million as of October 26, 2023.

Moat

Competitive Advantages:

• Unique Strategy: NRGU offers leveraged exposure to the oil and gas exploration & production sector, allowing investors to amplify their gains or losses.
• Liquidity: NRGU is typically among the most traded oil and gas ETNs, providing investors with relatively easy entry and exit.

Financial Performance

Historical Performance: NRGU has historically experienced significant volatility, with annual returns ranging from large gains to significant losses. Its performance is highly dependent on the underlying index movement.

Benchmark Comparison: NRGU's performance has generally been inversely correlated to the Solactive MicroSectors Oil & Gas Exploration & Production Index. When the index rises, NRGU tends to fall, and vice versa.

Growth Trajectory: The future performance of NRGU is uncertain and depends on various factors like oil prices, industry developments, and market sentiment.

Liquidity

Average Trading Volume: 1.5 million shares per day.

Bid-Ask Spread: Tight bid-ask spread, generally around $0.01.

Market Dynamics

Factors Affecting Market Environment:

• Oil prices
• Global economic growth
• Geopolitical events
• Energy demand
• Technological advancements

Competitors

• SCO: ProShares UltraShort Bloomberg Crude Oil (4.8% market share)
• OIL: United States Oil Fund, LP (0.2% market share)

Expense Ratio

Expense Ratio: 0.95%

Investment Approach and Strategy

Strategy: Inversely track the Solactive MicroSectors Oil & Gas Exploration & Production Index.

Composition: Invests in swap agreements and futures contracts on the underlying index.

Key Points

• Highly leveraged inverse exposure to the oil and gas exploration & production sector.
• Aims to achieve a return that is -300% of the daily index performance.
• Can magnify gains or losses compared to traditional investments.
• Offers significant liquidity and a tight bid-ask spread.

Risks

• Volatility: NRGU is highly volatile and can experience significant price swings.
• Market Risk: The performance of NRGU is highly dependent on the underlying index, which can be affected by various factors.
• Counterparty Risk: Investment in swap agreements and futures contracts involves counterparty risk.
• Inverse Correlation: NRGU's performance is inversely correlated to the underlying index, meaning it loses value when the index rises and vice versa.

Who Should Consider Investing

NRGU is suitable for experienced investors who understand leveraged investments and are comfortable with high volatility. It can be used for short-term trading or hedging strategies.

Fundamental Rating Based on AI

Rating: 6/10

Justification: NRGU's unique strategy and liquidity are advantageous. However, its high volatility, dependence on the underlying index, and counterparty risk make it a risky investment.

Resources

• https://www.vaneck.com/us/en/etf/equity/nrgu/overview
• https://www.solactive.com/indices/?index=S5SLMUJ9ER
• https://finance.yahoo.com/quote/NRGU/

Disclaimers

This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.