ProShares Ultra Basic Materials (UYM)

Overview

ProShares Ultra Basic Materials (UBM) is an exchange-traded fund that seeks to provide leveraged investment results that correspond to twice the daily performance of the Dow Jones U.S. Basic Materials Index. It targets the basic materials sector, which includes companies involved in the production of chemicals, metals, minerals, and paper and forest products.

Reputation and Reliability

ProShares is a well-established ETF provider known for its range of leveraged and inverse ETFs. They have a significant presence in the market and are generally considered reliable in their product offerings.

Management Expertise

ProShares ETFs are managed by the ProShares management team, which has extensive experience in creating and managing complex financial products. Specific individuals are not typically highlighted for individual ETFs.

Goal

To deliver twice the daily performance of the Dow Jones U.S. Basic Materials Index.

Investment Approach and Strategy

Strategy: UBM aims to achieve its objective through the use of financial derivatives, including swap agreements and futures contracts, to gain exposure to the underlying index's performance on a daily leveraged basis. It does not aim to track the index over longer periods.

Composition The ETF's holdings consist primarily of derivative instruments designed to replicate the daily leveraged returns of the Dow Jones U.S. Basic Materials Index. It does not hold the underlying stocks of the index directly.

Market Share: Specific market share data for individual leveraged ETFs like UBM is not readily available as a distinct metric. Its market presence is within the broader leveraged and basic materials ETF universe.

Total Net Assets (AUM): 125000000

Key Competitors

• Direxion Daily Basic Materials Bull 2X Shares (SBM)
• ProShares Ultra DJ-UBS Commodity (AUA)

Competitive Landscape

The leveraged basic materials ETF space is relatively niche. Competitors often offer similar 2x or 3x daily leverage on various basic materials indices or commodity indices. UBM's primary advantage is its direct focus on basic materials via the Dow Jones U.S. Basic Materials Index, while competitors may have broader commodity exposure or slightly different index methodologies. A disadvantage is the inherent complexity and risk associated with leveraged ETFs, which can lead to significant divergence from the index's long-term performance.

Historical Performance: Performance data for leveraged ETFs is highly dependent on daily movements and time horizon. Over longer periods, the compounding effect of daily rebalancing can cause UBM's performance to deviate significantly from twice the index's return. For example, YTD performance might be positive, but 1-year or 3-year performance could be negative even if the underlying index was flat or slightly positive.

Benchmark Comparison: UBM is designed to track twice the daily performance of the Dow Jones U.S. Basic Materials Index. Its performance relative to the index over longer periods is not expected to be a direct multiple of the index's performance due to daily rebalancing.

Expense Ratio: 0.95

Average Trading Volume

The average trading volume for UBM is sufficient for active traders to enter and exit positions efficiently.

Bid-Ask Spread

The bid-ask spread for UBM is generally tight, indicating good intraday liquidity and relatively low transaction costs for active traders.

Market Environment Factors

The performance of UBM is heavily influenced by global economic growth, industrial production, commodity prices (e.g., oil, metals), and geopolitical events that impact supply and demand for basic materials. Inflationary pressures and interest rate changes also play a significant role in the sector's outlook.

Growth Trajectory

As a leveraged ETF, UBM's growth trajectory is not about long-term asset appreciation but about its ability to provide amplified daily returns. Its strategy and holdings remain consistent, focused on derivative contracts to achieve its leveraged objective.

Competitive Edge

UBM's competitive edge lies in its targeted exposure to the basic materials sector with daily double leverage, appealing to short-term traders and investors seeking amplified gains from anticipated sector movements. Its association with ProShares provides a level of trust and accessibility for investors familiar with leveraged products. The ETF offers a straightforward way to express a bullish short-term view on the basic materials industry.

Volatility

UBM is a highly volatile ETF due to its leveraged nature. Its daily price movements are expected to be approximately twice the daily movements of its underlying index, amplifying both gains and losses.

Market Risk

The primary market risks associated with UBM stem from the inherent volatility of the basic materials sector, including fluctuations in commodity prices, global demand, and supply chain disruptions. Additionally, the leveraged structure introduces tracking risk and the potential for significant underperformance compared to the underlying index over longer periods due to daily rebalancing and compounding.

Ideal Investor Profile

The ideal investor for UBM is an experienced trader or sophisticated investor with a strong understanding of leveraged financial products and a short-term outlook on the basic materials sector. They should have a high-risk tolerance and be prepared for significant price swings.

Market Risk

UBM is best suited for active traders looking to capitalize on short-term price movements in the basic materials sector. It is not suitable for long-term investors or those seeking to track index performance over extended periods.

ProShares Ultra Basic Materials (UBM) is a leveraged ETF designed to deliver twice the daily performance of the Dow Jones U.S. Basic Materials Index. It utilizes derivatives for its strategy and is characterized by high volatility and a suitability for active traders with a short-term focus. While offering amplified exposure to the basic materials sector, its leveraged nature makes it inappropriate for long-term investment and prone to performance divergence over time.

Data Sources:

• ProShares website
• Financial data aggregators (e.g., Morningstar, ETF.com)

Disclaimers:

This information is for informational purposes only and does not constitute investment advice. Leveraged ETFs are complex and carry a high level of risk. Investors should consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.