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

Overview

The ETRACS ProShares Daily 3x Inverse Crude ETN (ticker symbol: WTID) is an exchange-traded note designed to provide three times the inverse (opposite) of the daily performance of the Bloomberg WTI Crude Oil Subindex. WTID offers investors a way to potentially profit from a decline in the price of West Texas Intermediate (WTI) crude oil. It should be noted that it is designed for short-term trading and is not suitable for long-term holding.

Reputation and Reliability

UBS is a major global financial institution; ETRACS are Exchange Traded Notes that are debt instruments issued by UBS. The reliability depends on UBS's creditworthiness.

Management Expertise

ProShares manages the daily rebalancing and investment strategy of the ETN, bringing expertise in leveraged and inverse products.

Goal

To seek daily investment results, before fees and expenses, that correspond to three times the inverse (-3x) of the daily performance of the Bloomberg WTI Crude Oil Subindex.

Investment Approach and Strategy

Strategy: This ETN uses leverage to achieve its investment objective, meaning it borrows funds to amplify returns (or losses). It is rebalanced daily to maintain the 3x inverse exposure.

Composition The ETN does not hold physical assets. Its return is based on the performance of the underlying index through a contractual obligation of the issuer, UBS.

Market Share: Due to its nature as an ETN and its specific investment objective, WTID has a niche market share within the energy and inverse ETF/ETN space.

Total Net Assets (AUM): 49500000

Key Competitors

• ProShares UltraShort Bloomberg Crude Oil (SCO)
• Direxion Daily Energy Bear 3X Shares (ERY)

Competitive Landscape

The competitive landscape consists of other inverse and leveraged energy ETFs/ETNs. WTID's 3x leverage provides higher potential returns (and losses) than some competitors, but also exposes investors to more risk and potential decay due to daily rebalancing. SCO is more liquid and ERY is more broadly exposed to energy and not solely crude oil.

Historical Performance: Historical performance can be highly volatile due to the leveraged and inverse nature of the ETN. The performance of WTID has varied depending on fluctuations in the price of WTI crude oil.

Benchmark Comparison: The ETN's performance is compared to three times the inverse of the Bloomberg WTI Crude Oil Subindex. Tracking error can occur due to fees, expenses, and daily rebalancing.

Expense Ratio: 1.2

Average Trading Volume

The average trading volume is moderate but can vary significantly based on crude oil market volatility.

Bid-Ask Spread

The bid-ask spread can be wider than more liquid ETFs, especially during periods of high volatility or low trading volume.

Market Environment Factors

Crude oil prices are influenced by global supply and demand, geopolitical events, economic growth, and inventory levels.

Growth Trajectory

The ETN's value is inversely related to the price of crude oil, with a 3x daily multiplier. Thus, there is no fundamental growth; gains and losses depend on the short-term performance of WTI crude oil.

Competitive Edge

WTID's main advantage lies in its 3x inverse leverage, offering the potential for magnified returns for sophisticated investors who correctly predict short-term declines in crude oil prices. It is a targeted tool for expressing a bearish view on WTI crude oil. However, the daily rebalancing mechanism and inherent risks of leveraged products makes it unsuitable for buy-and-hold investors. The advantage is the high leverage and short-term focused strategy.

Volatility

WTID is highly volatile due to its leveraged and inverse nature. Small changes in crude oil prices can result in significant gains or losses.

Market Risk

The ETN is subject to market risk related to fluctuations in crude oil prices, as well as counterparty risk associated with UBS as the issuer of the ETN.

Ideal Investor Profile

The ideal investor is a sophisticated trader with a high risk tolerance who seeks short-term exposure to the inverse performance of crude oil.

Market Risk

WTID is best suited for active traders with a short-term investment horizon and a strong understanding of leveraged and inverse products. It is not suitable for long-term investors.

WTID is a high-risk, high-reward ETN designed for short-term trading of crude oil price declines. It uses 3x leverage to amplify inverse returns, but also increases the potential for losses and decay. Investors should understand the risks associated with leveraged and inverse products before investing. WTID's value is directly tied to the volatility of WTI crude oil, making it a tool for speculation, not long-term investment.

Data Sources:

• ProShares
• UBS
• Bloomberg

Disclaimers:

This analysis is for informational purposes only and does not constitute financial advice. Investing in leveraged and inverse products involves significant risks, including the potential for substantial losses. Investors should consult with a qualified financial advisor before making any investment decisions.