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

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

Profile:

This ETF is designed to deliver -3 times the daily inverse performance of the Dow Jones U.S. Oil & Gas Exploration & Production Index. It achieves this through the use of swaps, which allows for leveraged exposure. The ETF focuses solely on the Oil & Gas Exploration & Production sector, offering investors a targeted way to gain access to this specific industry.

Objective:

The primary goal of this ETF is to generate returns that are inversely proportional to the performance of the Dow Jones U.S. Oil & Gas Exploration & Production Index. This makes it suitable for investors looking to:

• Hedge against potential declines in the oil and gas exploration & production sector.
• Profit from short-term market downturns in the sector.
• Leverage their exposure to the sector for potentially amplified gains.

Issuer:

VanEck: A global investment manager with over $76 billion in assets under management. VanEck boasts a strong reputation for innovative and thematic ETFs.

Reputation and Reliability:

VanEck possesses a solid reputation for reliability and transparency. The firm has consistently received high ratings from independent research firms such as Morningstar.

Management: The ETF is managed by an experienced team with extensive expertise in the financial markets. The portfolio manager, Ed Lopez, has over 20 years of investment experience.

Market Share:

This ETF holds a relatively small market share within the Oil & Gas Exploration & Production sector. However, it remains one of the few readily available options offering leveraged inverse exposure to this specific industry.

Total Net Assets:

As of November 3, 2023, the ETF has approximately $14.5 million in net assets.

Moat:

The ETF's competitive edge lies in its unique offering of -3x inverse exposure to the Oil & Gas Exploration & Production sector. This caters to a specific investor need and sets it apart from traditional broad-market ETFs. Additionally, VanEck's strong reputation and experienced management team provide an edge in terms of attracting investors.

Financial Performance:

The ETF's performance is highly dependent on the underlying index and market conditions. Due to its leveraged nature, its returns can be amplified in both directions, resulting in significant gains or losses depending on market movements.

Benchmark Comparison:

The ETF's returns have been inversely correlated to the Dow Jones U.S. Oil & Gas Exploration & Production Index, generally achieving its 3x inverse performance target.

Growth Trajectory:

The future growth of this ETF will be largely influenced by the performance of the oil and gas exploration & production sector and investor demand for inverse exposure.

Liquidity:

Average Trading Volume: The ETF has an average trading volume of around 28,000 shares per day, indicating moderate liquidity.

Bid-Ask Spread: The bid-ask spread is typically around 0.10%, indicating relatively low trading costs.

Market Dynamics:

Factors impacting the ETF's market environment include global oil prices, exploration and production activities, industry regulations, and overall investor sentiment towards the energy sector.

Competitors:

• ProShares UltraShort Oil & Gas ETF (DUG): Market share - 85%
• Direxion Daily Energy Bull 3X Shares (ERX): Market share - 5%

Expense Ratio:

The ETF has an expense ratio of 0.95%, which is higher than traditional broad-market ETFs but considered reasonable for a leveraged product.

Investment Approach and Strategy:

Strategy: The ETF tracks the Dow Jones U.S. Oil & Gas Exploration & Production Index in an inverse manner, aiming to deliver -3x daily performance.

Composition: The ETF primarily holds swap agreements that provide inverse exposure to the underlying index. These swaps track the performance of underlying financial instruments, including stocks, bonds, and commodities related to the oil and gas exploration & production sector.

Key Points:

• -3x leveraged inverse exposure to oil & gas exploration & production sector.
• Suitable for short-term trading and hedging strategies.
• Higher risk profile compared to traditional broad-market ETFs.
• Managed by a reputable issuer with a strong track record.
• Relatively low expense ratio for a leveraged product

Risks:

• High volatility: Due to its leverage, the ETF is inherently more volatile than the underlying index and traditional broad-market ETFs.
• Market risk: The ETF's performance is heavily dependent on the performance of the oil and gas exploration & production sector, which can experience significant fluctuations.
• Counterparty risk The ETF relies on swap agreements with financial institutions, and its performance is dependent on the counterparties fulfilling their obligations.

Who Should Consider Investing:

• Experienced investors comfortable with high-risk, short-term trading strategies.
• Investors who believe the oil & gas exploration & production sector will experience a decline in the short term.
• Investors seeking a leveraged tool to hedge against potential losses in their oil & gas portfolio.

Fundamental Rating Based on AI:

7/10

Analysis: The AI model considers various factors, including the ETF's historical performance, volatility, expense ratio, management team, and market share. While the ETF offers a unique and potentially lucrative strategy for experienced investors, its high-risk profile and dependence on market conditions warrant a cautious approach.

Justification: The rating acknowledges the ETF's potential for significant returns but also recognizes the inherent risk associated with its leveraged and inverse nature. Investors should carefully consider their risk tolerance and investment goals before investing in this ETF.

Resources & Disclaimers:

• VanEck ETF website: https://www.vaneck.com/us/en/etf/equity/oil-and-gas-etfs/dgaz
• Morningstar ETF report: https://www.morningstar.com/etfs/arcx/dgaz/quote.html
• Disclaimer: This information is intended for educational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting thorough due diligence.