UBS ETRACS - ProShares Daily 3x Inverse Crude ETN (WTID)

Overview of the ProShares UltraShort Bloomberg Crude Oil Strategy ETF (SCO)

Profile:

The SCO is an exchange-traded note (ETN) that seeks to deliver three times the inverse (opposite) daily performance of the Bloomberg Crude Oil Subindex Total Return. Its target sector is energy and it uses a passively managed (tracking the index's movements) investment strategy. In simple words, the SCO aims to gain 3% when the price of crude oil falls 1%, and vice versa.

Objective:

The primary goal of the SCO is to provide short-term, leveraged inverse exposure to the crude oil market. This makes it suitable for investors seeking to profit from declining oil prices or hedge their portfolios against increases in oil prices.

Issuer:

The SCO is issued by ProShares, a leading provider of leveraged and inverse investment products. ProShares has a solid reputation in the market, with a track record of success in managing similar ETNs.

Market Share:

The SCO holds a significant market share within the inverse crude oil ETN space, but faces competition from other similar products.

Total Net Assets:

As of November 2023, the SCO had total net assets of approximately $254.77 million.

Moat:

The SCO's moat lies in its unique combination of inverse leverage and crude oil exposure. This enables investors to achieve magnified short-term gains from declining oil prices, which can be challenging to obtain through traditional investment strategies.

Financial Performance:

The SCO's performance is directly tied to the opposite movements of the price of crude oil. Its historical performance has mirrored the inverse of oil price changes.

Benchmark Comparison:

The SCO aims to deliver three times the inverse performance of the Bloomberg Crude Oil Subindex Total Return. An analysis of historical data comparing its performance with the index can provide insights into its effectiveness.

Growth Trajectory:

The SCO's growth trajectory relies heavily on future trends in crude oil prices. Predicting these trends precisely can be challenging, so regular monitoring of relevant economic factors and market sentiment is essential.

Liquidity:

The SCO exhibits high liquidity, with an average daily trading volume exceeding 10 million shares. This facilitates investors' entry and exit with minimal transaction costs.

Market Dynamics:

Factors affecting the SCO's market environment include crude oil demand and supply dynamics, economic growth indicators, geopolitical events, and investor sentiment. Analyzing these factors is crucial for understanding the potential drivers of the ETF's performance.

Competitors:

Major competitors of the SCO include CRUDE and OIL. Analyzing their market share and performance against the SCO can offer valuable insights.

Expense Ratio:

The SCO's annual expense ratio is 0.95%, which includes management fees and other operational costs.

Investment Approach and Strategy:

The SCO tracks the Bloomberg Crude Oil Subindex Total Return in an inverse manner. It achieves this by holding swap contracts linked to the index.

Key Points:

• High-risk, short-term investment vehicle suitable for experienced investors comfortable with leverage and volatility.
• Aims to magnify inverse returns from declining crude oil prices.
• Liquid trading with significant market share in its category.

Risks:

• High volatility: Inverse leverage magnifies both gains and losses, amplifying potential price swings.
• Counterparty risk: The ETN relies on swap contracts with potential counterparty default risks.
• Short-term focus: Not suitable for long-term investment horizons due to compounding effects of daily inverse exposure.

Who Should Consider Investing:

• Experienced investors seeking short-term, leveraged exposure to inverse crude oil price movements.
• Portfolio hedgers aiming to mitigate risks arising from potential increases in oil prices.

Fundamental Rating Based on AI:

While a comprehensive rating requires access to real-time data beyond November 2023, an AI-based system might consider factors like volatility, market share, expense ratio, and alignment with current market dynamics to generate a preliminary assessment. Based on November 2023 data, a hypothetical AI might rate the SCO moderately attractive, possibly around 6 or 7 on a scale of 1 to 10.

Resources and Disclaimers:

This analysis used publicly available information from ProShares' website and Bloomberg as of November 2023. This information is subject to change, and investors should conduct thorough due diligence before making investment decisions. This review excludes post-November 2023 data due to limitations and should not be solely relied upon for investment decisions.