ProShares UltraShort Bloomberg Crude Oil (SCO)

US ETF ProShares UltraShort Bloomberg Crude Oil (SCO)

Profile

ProShares UltraShort Bloomberg Crude Oil (SCO) is an exchange-traded fund (ETF) designed to deliver twice the inverse (-2x) daily performance of the Bloomberg Crude Oil Subindex Total Return. The ETF primarily focuses on the crude oil market, employing shorting strategies to profit from price declines. SCO utilizes futures contracts to achieve its investment objective.

Objective

The primary investment goal of SCO is to offer investors a way to potentially benefit from short-term declines in crude oil prices. The ETF aims to achieve twice the inverse return of the Bloomberg Crude Oil Subindex on a daily basis.

Issuer

ProShares is the issuer of SCO.

Reputation and Reliability: ProShares is a well-established ETF provider with a solid reputation in the market. Founded in 2006, the company offers a diverse range of thematic and sector-specific ETFs.

Management: ProShares has a team of experienced investment professionals managing its ETFs. The team possesses expertise in various asset classes and quantitative strategies.

Market Share

SCO holds a significant market share within the inverse crude oil ETF segment. However, precise market share data is unavailable for this specific ETF.

Total Net Assets

As of October 27, 2023, SCO has total net assets of approximately $337 million.

Moat

The unique features of SCO include:

• Inverse exposure: The ETF offers the potential to benefit from falling crude oil prices, which can be attractive for investors seeking short-term hedges or portfolio diversification.
• Leveraged exposure: The 2x inverse strategy enables amplified gains compared to simply shorting the underlying index.
• Liquidity: SCO boasts relatively high trading volume, making it a liquid option for investors.

Financial Performance

Historical Performance: SCO's performance varies significantly depending on the crude oil price movements. During periods of declining oil prices, the ETF tends to outperform the Bloomberg Crude Oil Subindex. Conversely, when oil prices rise, SCO experiences losses magnified by its leverage.

Benchmark Comparison: SCO's performance is inversely correlated to the Bloomberg Crude Oil Subindex. When the benchmark index experiences gains, SCO loses twice the amount. When the benchmark index drops, SCO gains double the decline.

Growth Trajectory: SCO's growth trajectory is tied to the volatility and direction of crude oil prices. In periods of high oil price volatility or anticipated price declines, investor interest in SCO tends to increase.

Liquidity

Average Trading Volume: SCO has an average daily trading volume of around 1.8 million shares, indicating good liquidity.

Bid-Ask Spread: The bid-ask spread for SCO typically ranges between 0.05% and 0.10%, implying relatively low transaction costs.

Market Dynamics

Factors affecting SCO's market environment include:

• Global oil demand and supply: Changes in global oil demand and supply significantly impact crude oil prices and consequently affect SCO's performance.
• Geopolitical events: Conflicts and political instability in major oil-producing regions can influence oil prices and impact SCO.
• Economic conditions: Global economic growth and recessions can affect oil demand and prices, impacting SCO's performance.

Competitors

Key competitors of SCO include:

• ProShares Short Oil & Gas (DUG)
• VelocityShares 3x Inverse Crude Oil ETN (OILD)
• Direxion Daily S&P Oil & Gas Exploration & Production Bear 2X Shares (DRIP)

These competitors offer similar inverse exposure to crude oil with varying leverage ratios.

Expense Ratio

SCO's expense ratio is 0.95%, which covers the fund's operating costs and management fees.

Investment Approach and Strategy

Strategy: SCO aims to track the inverse (-2x) daily performance of the Bloomberg Crude Oil Subindex Total Return. The ETF achieves this by employing shorting strategies through futures contracts.

Composition: SCO primarily invests in short-term crude oil futures contracts, aiming to profit from price declines in the underlying index.

Key Points

• Inverse exposure to crude oil prices: Provides potential gains during periods of falling oil prices.
• Leveraged exposure: Amplifies gains and losses compared to simply shorting the underlying index.
• High liquidity: Offers relatively easy buying and selling opportunities.
• High expense ratio: 0.95% expense ratio may impact long-term returns.

Risks

• Volatility: SCO's price can fluctuate significantly due to its leveraged exposure and the inherent volatility of crude oil prices.
• Market risk: The ETF's performance is directly tied to the crude oil market, exposing investors to risks associated with oil price movements.
• Tracking error: The ETF may not perfectly track the inverse (-2x) daily performance of the Bloomberg Crude Oil Subindex due to factors such as fees and trading costs.

Who Should Consider Investing

SCO is suitable for investors:

• Seeking short-term exposure to declining crude oil prices.
• Hedging existing exposure to crude oil.
• Experienced with leveraged investment strategies.
• Tolerant of high volatility.

Fundamental Rating Based on AI

8.5/10

SCO receives a favorable rating based on its unique inverse exposure, potential for amplified gains, and relatively high liquidity. However, the high expense ratio and inherent volatility associated with leveraged investment strategies are important considerations.

Resources and Disclaimers

• ProShares UltraShort Bloomberg Crude Oil ETF (SCO) Website: https://www.proshares.com/funds/sco.html
• Bloomberg Crude Oil Subindex: https://www.bloomberg.com/markets/commodities/futures/bloomberg-crude-oil-subindex

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