UBS ETRACS - ProShares Daily 3x Long Crude ETN (WTIU)

Overview

The ETRACS ProShares Daily 3x Long Crude ETN (OILU) provided 3x the daily performance of the Bloomberg WTI Crude Oil Subindex. However, it has been delisted and no longer trades.

Reputation and Reliability

UBS is a well-known financial institution, but the ETN's complexity and risk profile impacted its reputation regarding this specific product.

Management Expertise

ETNs, in general, involve complex financial engineering. UBS's expertise is in structuring such products, not necessarily in active management of underlying assets.

Goal

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

Investment Approach and Strategy

Strategy: It aimed to provide leveraged exposure to the daily changes in the price of WTI crude oil futures.

Composition The ETN's value was tied to WTI crude oil futures contracts, not direct physical holdings of oil or equity in oil companies.

Market Share: N/A (delisted)

Total Net Assets (AUM): N/A (delisted)

Key Competitors

• UCO
• SCO
• OIL
• GUSH

Competitive Landscape

The competitive landscape for leveraged crude oil products is highly volatile. OILU faced challenges due to its high leverage, which led to significant value erosion during periods of market volatility. Competitors offer varying levels of leverage and strategies, catering to different risk appetites. OILUu2019s high leverage could be an advantage in strongly trending markets but a significant disadvantage during whipsaw conditions compared to its competitors.

Historical Performance: Historical performance data is unreliable due to its delisting and the effects of compounding in leveraged products.

Benchmark Comparison: Comparison to the benchmark is problematic due to the leverage factor. The fund often deviated significantly from 3x the daily change in the underlying index due to compounding effects.

Expense Ratio: 0.95

Average Trading Volume

Before delisting, the average trading volume varied but generally indicated reasonable liquidity relative to its AUM.

Bid-Ask Spread

The bid-ask spread was typically wider than non-leveraged ETFs, reflecting the higher trading costs and risks associated with leveraged products.

Market Environment Factors

Economic indicators, geopolitical events, and supply/demand factors significantly influence the price of crude oil, impacting OILU's value.

Growth Trajectory

There is no growth trajectory as the ETN has been delisted and is no longer trading.

Competitive Edge

OILU did not possess a strong competitive advantage. Its primary differentiator was the 3x leverage, which, while attractive to some, ultimately proved to be a significant drawback due to the effects of compounding and volatility erosion. The complex nature of leveraged ETNs and their susceptibility to significant value loss during periods of market turbulence further hindered its competitive position. It did not have unique access to resources nor brand recognition sufficient to offset its intrinsic risks, thus lacking a sustainable advantage.

Volatility

OILU exhibited extremely high volatility due to its 3x leverage, making it highly sensitive to daily price swings in crude oil.

Market Risk

The primary risk was the inherent volatility of crude oil prices and the impact of compounding, which could lead to significant losses, especially in range-bound or volatile markets.

Ideal Investor Profile

This ETN was suitable only for sophisticated investors with a high-risk tolerance and a deep understanding of leveraged products and the crude oil market. It was designed for short-term tactical trading, not long-term investing.

Market Risk

OILU was best suited for active traders seeking short-term exposure to crude oil price movements, not long-term investors or passive index followers.

The ETRACS ProShares Daily 3x Long Crude ETN (OILU) provided leveraged exposure to WTI crude oil futures. However, its high leverage resulted in extreme volatility and value erosion, particularly during periods of market instability. Due to these risks and structural issues related to leveraged ETNs, OILU has been delisted. It was only suitable for sophisticated, short-term traders with a deep understanding of the crude oil market and the risks associated with leveraged products. Investors should consult their financial advisor to determine the suitability of investments and do their own due diligence.

Data Sources:

• SEC Filings
• ETF.com
• Bloomberg
• Company Fact Sheets

Disclaimers:

The data provided is for informational purposes only and should not be considered financial advice. The information is based on available data and may be subject to change. Past performance is not indicative of future results. Leveraged ETFs and ETNs are inherently risky and can result in significant losses. This ETN is delisted.