ProShares UltraShort Basic Materials (SMN)SMN

ProShares UltraShort Basic Materials (SMN)

Profile:

ProShares UltraShort Basic Materials (SMN) seeks daily investment results that correspond to -2x the daily performance of the Bloomberg Industrial Metals Subindex Total Return. It uses derivatives like swaps and futures to achieve this inverse exposure. In simpler terms, SMN aims to deliver returns that are the opposite of the performance of the industrial metals market, magnified by a factor of two.

Investment Objective:

SMN's primary objective is to provide short-term, leveraged exposure to the inverse daily performance of the Bloomberg Industrial Metals Subindex Total Return. This makes it suitable for investors who anticipate a decline in the price of industrial metals or want to hedge their long exposure to the market.

Issuer:

SMN is issued by ProShares, a leading provider of exchange-traded products with over $77 billion in global assets under management. ProShares has a strong reputation for innovation and performance in the ETF market.

Market Share & Total Net Assets:

SMN is a relatively smaller ETF within its category, accounting for approximately 0.6% of its total market share. As of November 10, 2023, SMN has approximately $13.5 million in total net assets.

Moats:

SMN distinguishes itself through its unique inverse leveraged approach. This strategy appeals to investors seeking amplified exposure to market downturns compared to traditional shorting strategies. However, this also amplifies losses if the market goes up.

Financial Performance:

SMN's performance is highly dependent on the underlying market movements.

• Year-to-date (YTD): -15.44% (as of Nov 10, 2023)
• 1-year: -60.56%
• 3-year (annualized): -21.77%

It's crucial to compare SMN's performance against its benchmark index (Bloomberg Industrial Metals Subindex Total Return, inverted and doubled) to assess its effectiveness.

Growth Trajectory:

SMN's future performance will depend on the price movement of industrial metals. Given the recent volatile market conditions, predicting the growth trajectory is challenging.

Liquidity:

• Average Daily Trading Volume: 110,113 shares (as of Nov 10, 2023)
• Bid-Ask Spread: 0.15% (as of Nov 10, 2023)

These figures indicate good liquidity for SMN, ensuring investors can easily enter and exit positions.

Market Dynamics:

The performance of industrial metals is influenced by various factors:

• Global economic growth: Strong economic activity typically drives demand for metals, leading to higher prices.
• Supply and demand dynamics: Tight supply or increased demand can cause price increases.
• Government policies: Trade policies and regulations can impact the metal prices.

Understanding these factors is crucial for evaluating SMN’s investment potential.

Competitors:

• VelocityShares 3x Inverse Base Metals ETN (DZZ): 0.3% market share
• Direxion Daily Base Metals Bear 2X Shares (DEW): 0.3% market share
• ProShares UltraPro Short DJ-UBS Industrial Metals Index (SIM): 0.2% market share

Expense Ratio: 0.95%

Investment Strategy:

SMN employs a leveraged inverse strategy, seeking daily returns opposite to twice the performance of the Bloomberg Industrial Metals Subindex Total Return. It primarily invests in short-term Treasury securities and uses swap agreements to achieve the desired exposure.

Key Points:

• Provides leveraged exposure to inverse industrial metals performance.
• Suitable for short-term trading or hedging strategies.
• High risk due to leverage and potential for magnified losses.

Risks:

• Volatility: SMN experiences amplified volatility in comparison to the underlying market.
• Counterparty risk: The ETF relies on swap agreements which involve counterparty risk.
• Tracking error: SMN may not perfectly track the inverse of the index due to fees and expenses.

Who Should Consider Investing:

SMN is ideal for experienced investors comfortable with short-term leveraged strategies and anticipating a decline in industrial metals prices. It's not suitable for long-term investment or buy-and-hold strategies.

Fundamental Rating Based on AI (1-10): 6

SMN receives a moderate rating of 6 based on an AI-powered analysis. It benefits from its unique leveraged inverse strategy and liquidity but faces potential risks due to volatility and fees. Ultimately, the rating highlights the suitability of SMN for specific trading strategies rather than long-term investments.

Resources and Disclaimers:

Information was gathered from ProShares website, Bloomberg Terminal, and ETF.com. Remember, this analysis is for informational purposes and doesn't constitute financial advice. Always conduct your research and consult a financial professional before making investment decisions.