How To Profit From Oil Volatility Using ETFs

XOP (SPDR Oil & Gas Exploration & Production, Expense Ratio 0.35%), as we have mentioned lately, is one of the most volatile ETFs in the short term thanks to Crude Oil volatility itself surrounding OPEC.

Options in the product continue to trade briskly amid this volatility, and we have seen some closing put selling in the December 35 strikes, which are now well out-of-the-money (the fund is trading with a $41 handle this morning and traded as high as $43.24 on an intraday basis yesterday), given the huge leg-up the sector has had in the past several sessions on higher crude.

XOP-2016-12-02

XOP has pulled in about $65 million in the trailing one-month period, bringing its asset base to the $1.8 billion level. The extreme volatility in this space also should generate added interest in two Bull and Bear levered products that track the same underlying index that XOP does, albeit with three times daily leverage. GUSH (Direxion Daily S&P Oil & Gas Exploration & Production Bull 3X, Expense Ratio 0.95%, $70.9 million in AUM) and DRIP (Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X, Expense Ratio 0.95%, $16.5 million in AUM) come to mind, and both funds have seen staggering increases in daily trading volume in the past several sessions, perhaps bringing some more visibility to the presence of both funds for those portfolio managers whom not only trade XOP and options, but would be potentially interested in adding leverage to their trading strategies in the space given the recent short term volatility.

UOP (ProShares Ultra Oil & Gas Exploration & Production, Expense Ratio 0.95%, $1.7 million in AUM) and SOP (ProShares Ultra Oil & Gas Exploration & Production, Expense Ratio 0.95%, $1 million in AUM) debuted in June of 2015 and are ProShares’ entry into the leveraged space here (these products are structured as 2 times daily levered funds) and trading interest in them has picked up in recent days as well. These funds however remain very tiny and the trading volume levels are only a fraction of what we are seeing in the competing funds, GUSH and DRIP.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.