SCO Profile
The ProShares UltraShort Bloomberg Crude Oil ETF is designed to provide investors with a leveraged inverse exposure to the performance of crude oil, specifically West Texas Intermediate (WTI) sweet, light crude oil. The fund aims to achieve its investment objective by using a variety of financial instruments, including swap agreements, futures contracts, forward contracts, and options contracts, all of which are linked to the price movements of WTI crude oil. These instruments allow the fund to take a position that is expected to move inversely to the price of crude oil, typically with double the inverse performance.
This ETF does not invest directly in crude oil or physical oil assets but rather employs these derivative contracts to replicate the inverse performance of the Bloomberg WTI Crude Oil Subindex. The use of derivatives is intended to provide a daily performance that is -200% of the daily performance of the index, meaning that for every 1% decrease in the index, the ETF is designed to increase by approximately 2%. This leveraged inverse exposure is targeted at investors who anticipate a decline in crude oil prices and seek to benefit from that decline.
The fund's strategy involves managing its exposure to crude oil by adjusting its portfolio of derivatives in response to market conditions. This active management aims to ensure that the fund's performance aligns with its investment objective on a daily basis. Due to the use of leverage and derivatives, the ETF is designed for short-term trading and may not be suitable for long-term investors, as its performance can deviate significantly from the inverse of the index over longer periods due to the compounding of daily returns.
Investors in the ProShares UltraShort Bloomberg Crude Oil ETF should be aware of the risks associated with leveraged and inverse ETFs, including the potential for significant losses if the market moves against their position. The fund's use of complex financial instruments and leverage means that it is exposed to higher volatility and can experience substantial fluctuations in value. As such, it is intended primarily for sophisticated investors with a short-term trading horizon who are looking to hedge against or profit from declines in crude oil prices.
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