Market Overview

With Earnings Looming, Gas Up With These ETFs

With Earnings Looming, Gas Up With These ETFs

Third-quarter earnings season is winding down. This week, just over 23 percent of the S&P 500 reports earnings compared with nearly 40 percent last week.

Some sectors, however, have an onslaught of earnings coming in the week, including natural gas equities. Natural gas has been one of this year's best-performing commodities as highlighted by a year-to-date gain of 13 percent for the United States Natural Gas Fund (NYSE: UNG).

What Happened

Natural gas equities have not been that fortunate. The ISE-Revere Natural Gas Index (FUMTR) is lower by nearly 15 percent year-to-date. That has been good news for the Direxion Daily Natural Gas Related Bear 3X Shares (NYSE: GASX), which looks to deliver triple the daily inverse returns of the ISE-Revere Natural Gas Index.

The bearish GASX surged 36.33 percent last week while its bullish counterpart, the Direxion Daily Natural Gas Related Bull 3X Shares (NYSE: GASL), plunged 28.60 percent.

Why It's Important

Other equity-based leveraged energy ETFs often attract more attention than GASL and GASX, but the pair is worth considering for aggressive traders this week. Nearly 53 percent of the members in the ISE-Revere Natural Gas Index report earnings this week, according to Direxion.

For that index “equity securities are selected for inclusion in the Index using a quantitative ranking and screening system that begins with the universe of equity securities of issuers that are involved in the exploration and production of natural gas and that satisfy market capitalization, liquidity and weighting concentration requirements,” said Direxion. “After the screens are applied, the remaining equity securities are divided into equity securities issued by MLPs and equity securities issued by non-MLPs, allocated to the Index 15% and 85%, respectively.”

Over 81 percent of the components in that index are oil and gas exploration and production names and almost 13 percent are engaged in oil and gas storage and transportation.

What's Next

The earnings action for GASL and GASX is not confined to this week. For the week ending Nov. 9, about 29 percent of the companies in the ISE-Revere Natural Gas Index report quarterly results. Traders have added $8.91 million to the bullish GASL this quarter.

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