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The Long, Dark Winter Without Triple Leveraged Oil ETNs Is Over

by
January 6, 2017 8:22 am
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Remember the surprising announcement about the closure of the VelocityShares 3X Inverse Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSE: DWTI) and the VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSE: UWTI) last year?

It was surprising because when Credit Suisse Group AG (ADR) (NYSE: CS), the issuing bank behind DWTI and UWTI, said it was relegating the exchange notes to over-the-counter trading and ceasing acceptance of creation orders, the two ETNs had a combined $2 billion in assets under management. That is a hefty total for an exchange-traded product, or two, to be essentially euthanized.

Other Triple-Leveraged Oil ETNs

Adventurous traders need not fear because some triple-leveraged oil ETNs are back. ProShares and UBS Group AG (USA) (NYSE: UBS) introduced the ProShares Daily 3x Long Crude ETN (NYSE: WTUI) and the ProShares Daily 3x Inverse Crude ETN (NYSE: WTID).

“The returns on WTIU and WTID are linked, respectively, to the daily compounded 3x leveraged and 3x inverse performance, of the Bloomberg WTI Crude Oil Subindex ER,” according to a statement issued by Maryland-based ProShares, the largest issuer of leveraged ETFs.

“ETNs are debt securities issued by financial institutions that promise to pay the return of an index, minus fees and taxes. Consequently, investors are exposed to the credit risk or the possibility the underwriting bank goes bankrupt. The note can be vulnerable if the issuer gets into financial trouble, otherwise known as a default. With an ETN, an investor can lose some or all of their investment if the ETN issuer goes under,” according to ETF Trends.


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