Proshares provides 2 leveraged Oil & Gas Stock ETFs giving you a 2x long and short exposure to the Dow Jones Oil & Gas Index. The index is about 75% weighted to Oil and Gas Producers and 25% weighted to oil equipment, Services and Distribution. Both funds were introduced in January of 2007; they are very liquid ETFs thanks to an average daily trading volume of more than a million shares.
Leveraged ETFs are suitable for tactical investors with short term trades since there is no guarantee the ETF’s performance will track the index returns consistently in the long run. Remember that leveraged ETFs magnify the effects of price volatility resulting in bigger gains or losses occurring in very short time frames.
DIG – ProShares Ultra Oil & Gas ETF ( NYSEArca: DIG)
DIG $31.10 [+0.53]
Average Volume: 122855
DIG is a 2x ETF that seeks, before fees and expenses, to return 200% of the daily performance of the Dow Jones US Oil & Gas Index.
DUG – UltraShort Oil & Gas ProShares ETF ( NYSEArca: DUG)
DUG $49.26 [-0.87]
Average Volume: 79684
DUG is a 2x ETF that seeks, before fees and expenses, to return 200% the inverse of the daily performance of the Dow Jones US Oil & Gas Index.
The chart below clearly proves why you should avoid leveraged ETFs for a long term buy and hold strategy, these ETFs are simply for short term trading and not long term investing. Only a non-leveraged oil stock ETF or an ETF for natural gas stocks is suited to be used as a building block in a balanced portfolio.
Finally, if you think double leverage is not enough, check out these triple leveraged oil stock ETFs.