Tag Archives: natural gas

New ETFs Leverage Natural Gas, Retail Sectors

If you want to leverage a bet on natural gas or the retail sector, Direxion’s new ETFs will help you achieve that goal. On Wednesday, the Boston firm launched four new new leveraged ETFs, bringing its total to 38.

The Direxion Daily Natural Gas Related Bull 2X Shares (FCGL) seeks to produce 200% of the daily performance of the ISE-REVERE Natural Gas Index. The index tracks companies that derive a substantial portion of their revenues from the exploration and production of natural gas. Oil and gas exploration and production make up 72.1% of the index, while integrated oil and gas comprise 24.3%, with 3.5% in gas utilities. The Direxion Daily Natural Gas Related Bear 2X Shares (FCGS) seeks to produce twice the inverse return of the index.

The Direxion Daily Retail Bull 2X Shares (RETL) seeks to double the returns of the Russell 1000 RGS Retail Index, while the Direxion Daily Retail Bear 2X Shares (RETS) gives negative 200% return of the same index. The Russell 1000 RGS Retail Index contains constituents of the Russell 1000 Index that are classified within the Retail subsector of the Russell Global Sector Scheme.

The funds all have an expense ratio of 0.95%.

Hyland Calls Allegations “Gibberish”

Two of the most popular and least understood ETFs are the U.S. Oil Fund (USO) and the U.S. Natural Gas Fund (UNG). Many have blamed these funds for being partly responsible for excessive speculation that caused the surge in oil and gas prices.

In its effort to decide whether to impose limits on speculators in the energy markets, the Commodity Futures Trading Commission held three days of hearings in Washington.

John Hyland, the chief investment officer for both ETFs testified before the CFTC on Wednesday. Bloomberg gives a good overview of the testimony in which Hyland calls the allegation that his funds are responsible for rising prices “self-serving statistical gibberish.”

IndexUniverse offers the full transcript of Hyland’s testimony before the CFTC. In it Hyland rebutted the CFTC’s allegations by noting that there were only 325,000 investors in the fund and that between 75% and 90% were comprised of individual and retail investors, not institutions or investment funds. He added he believes the funds are widely held because no single investor has filed a 13G of 13F filing with the SEC. These filings are required of an investor holding an interest of more than 5% in a fund.

As for the charge by certain media outlets that the huge popularity of USO and UNG has caused prices to move artificially, Hyland fought back, saying “the management of USO believes that readily available information from USO’s website and other widely available financial news and data sources indicate that many or most of these claims lack merit.”

In February, the Wall Street Journal said USO had gotten so bit it was it’s affecting the oil market.

I followed the story with the following postings.

* Debating the WSJ’s Assessment of USO

* U.S. Oil to Change Roll Policy

* Suspected Front Running Cost USO $120 Million in February

And It Takes Two (Months) to Contango