List of Inverse and Leveraged Commodity ETFs

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Plenty of commodity exchange-traded funds (ETFs) are on the market today, including broad commodity funds and ETFs that track specific assets like energy, metals, and materials. Some investors favor implementing advanced ETF trading strategies like leveraged and inverse ETFs. These funds are for serious traders, and caution is highly advised when putting your money into these investments.

For those traders who want to apply alternate strategies to the commodity ETF market, here is a list of both leveraged and inverse ETFs, broken out by commodity type, both broad and specific.

What Are Leveraged and Inverse ETFs?

A leveraged commodity exchange-traded fund uses debt or derivatives to amplify or increase the returns of a commodity index. Leverage refers to increasing exposure to an asset without increasing investor outlays. Leveraged and inverse commodity ETFs are generally, but not always, identified by a 2x, 3x, or similar multiplier in their name. You might also see them with "bear" or "bull" in their names, which refer to the investor's outlook on the index. An investor with a bullish outlook expects the index to rise, while one with a bearish outlook expects the index to drop.

An inverse commodity ETF is designed in a way that inverts the returns on the index it tracks. Inverse ETFs attempt to turn an index value decrease into an increase in returns.

For example, the Direxion Daily Energy Bull 2X Shares ETF (ERX) is a leveraged fund based on the Energy Select Sector Index (IXETR)—note the bull reference—that attempts to deliver two times the return of the index. So, if the index rose five points, the ETF theoretically would return the equivalent of a 10-point increase.

The Direxion Daily Energy Bear 2X Shares ETF (ERY) is the inverse of ERX—note the "bear" reference. ERY attempts to turn a drop in the Energy Select Sector Index into returns that equal two times the inverse of the drop. For instance, if the index dropped five points, the ETF would theoretically return the equivalent of a 10-point increase.

Leveraged and inverse commodity ETFs are designed for daily trades, not buy-and-hold strategies. Attempting to hold these investment instruments for more than one trading day can result in significant, amplified losses.

Types of Leveraged and Inverse Commodity ETFs

There are several leveraged and inverse ETFs you can choose to swing or day trade. Here are a few that demonstrate these ETFs and the commodity sectors they represent.

Leveraged and Inverse Energy ETFs

These are based on an energy index comprised of the stocks of companies in the oil, gas & consumable fuels, and energy equipment services:

  • ERX - Direxion Daily Energy Bull 2X Shares ETF
  • ERY - Direxion Daily Energy Bear 2X Shares ETF

Leveraged and Inverse Oil ETFs

The list of leveraged and inverse oil ETFs is dwindling—there are only a few traded in the U.S.:

  • SCO - ProShares UltraShort Bloomberg Crude Oil (-2x)
  • UCO - ProShares UltraShort Bloomberg Crude Oil (2x)

Leveraged and Inverse Natural Gas ETFs

ProShares is the only one to offer leverage and inverse natural gas ETFs:

  • BOIL – ProShares Ultra DJ UBS Natural Gas ETF (2x)
  • KOLD – ProShares UltraShort DJ UBS Natural Gas ETF (-2x)

Leveraged and Inverse Gold ETFs

Leveraged and inverse gold ETFs are few in number as well:

  • DUST - Direxion Daily Gold Miners Bear 2x Shares ETF
  • NUGT - Direxion Daily Gold Miners Bull 2x Shares ETF
  • GLL - ProShares UltraShort Gold ETF (-2x)
  • UGL - ProShares Ultra Gold ETF (2x)

Leveraged and Inverse Silver ETFs

There are only two leveraged and inverse silver ETFs:

Leveraged and Inverse Materials ETFs

Leveraged and inverse materials ETFs are also hard to find, with only a few to choose from:

  • SMN – ProShares UltraShort Basic Materials ETF (-2x)
  • UYM - ProShares UltraBasic Materials ETF (2x)

Should You Trade Inverse and Leveraged Commodity ETFs?

Leveraged and inverse ETF trading is an advanced strategy—not for novices. Additionally, you have no safety net because your brokerage isn't legally obligated to step in and stop you if you're making a risky trade. With many of these ETFs, the upside and downside are nearly limitless.

Due to the risks involved, these instruments are under constant scrutiny from financial market regulators. Therefore, before making any trade, research all the funds you are considering for your portfolio. Conduct your due diligence, and be sure to consult your professional financial advisor unless you're a very experienced trader.

Frequently Asked Questions (FAQs)

How long should you hold a leveraged commodity ETF?

There aren't any rules about how long you can or can't hold a leveraged commodity ETF. You can hold the position as long as anything else in your portfolio, as long as your account is in good standing. However, leveraged products are designed for short-term traders. The holdings aren't direct investments in the target, so a long-term investor would likely prefer to invest in non-leveraged commodity ETFs.

How do you identify a leveraged ETF?

A leveraged ETF will note in its prospectus that it is leveraged. Depending on the ETF and the brokerage you use, you may also find this information under sections such as "stated objectives" or "profile," but it will always be in an ETF's prospectus.

What is the most leveraged inverse ETF?

Leveraged and inverse ETFs generally will not go above or below 3x or -3x. The amount of debt taken on to achieve these results varies by commodity type and fund.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.

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