New Targeted Sector ETNs Debut

Today REX Shares launched yet another set of additions to its MicroSectors series of ETNs. The latest products to launch cover “big oil” and include five leveraged and inverse ETNs as follows:

• MicroSectors U.S. Big Oil Index 3x Leveraged ETN (NRGU)
• MicroSectors U.S. Big Oil Index -3x Inverse Leveraged ETN (NRGD)
• MicroSectors U.S. Big Oil Index 2x Leveraged ETN (NRGO)
• MicroSectors U.S. Big Oil Index -2x Inverse Leveraged ETN (NRGZ)
• MicroSectors U.S. Big Oil Index Inverse ETN (YGRN)

The ETNs all come with an expense ratio of 0.95% and list on the NYSE Arca. Like the other MicroSectors ETNs, the new products are issued and backed by the Bank of Montreal.

Underlying Index

The MicroSectors ETNs offer 1x to 3x leveraged and inverse exposure to an index of just 10 extremely liquid equal-weighted equities. In the case of the big oil family of MicroSectors ETNs, the underlying for the group, the Solactive MicroSectors U.S. Big Oil Index, includes the following 10 stocks:

• Anadarko Petroleum (APC)
• ConocoPhillips (COP)
• Chevron (CVX)
• EOG Resources (EOG)
• Marathon Petroleum (MPC)
• Occidental Petroleum (OXY)
• Phillips 66 (PSX)
• Pioneer Natural Resources (PXD)
• Valero Energy (VLO)
• ExxonMobil (XOM)

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

The ETN structure is necessary, because with only 10 securities in the underlying index, the MicroSectors do not meet the diversification requirements for regular ETFs, which are required to have at least 20 securities.

But that’s really the point: The MicroSectors are designed as highly targeted trading tools that offer exposure to very specific themes via the largest and most liquid companies in the space.

"By offering MicroSectors ETNs, we can give investors a precise way to target their exposure to highly traded oil and energy companies," said Lawrence Kaplan, managing director and U.S. head at BMO Financial Group.

The concentrated portfolio, combined with the leveraged and inverse exposure, allows investors to express their strong opinions about a particular investment area in ways other than the traditional long-only exposure.

Just last week, REX rolled out a different family of five MicroSectors ETNs that are tied to an index of 10 of the largest U.S.-listed banks.

Contact Heather Bell at [email protected]