If you want to be against oil companies and their stocks, then you should opt for the ProShares UltraShort Oil & Gas ETF (NYSE Arca: DUG). DUG offers exposure to double the inverse (-2x) performance of the Dow Jones U.S. Oil & Gas Index. The index is a basket of leading exploration, production and services companies in the U.S., and includes holdings such as Exxon Mobil, Chevron, Halliburton and Occidental Petroleum.
In an environment of falling oil prices, DUG offers you the capability to effectively “short” a basket of the leading energy companies. Right after OPEC made the decision not to cut production, DUG jumped 13 percent the same day. Over the last six months, DUG has increased more than 30 percent. Again, just like SCO, you need to watch this ETF like a hawk; this is not a “buy and hold” product—you need to actively monitor it, especially because of the leverage it uses.
It is clear that we have entered a brave new world in the energy industrial complex. The time of high prices is coming to an end, and you need the right tools to be able to profit. The two ETFs I presented above offer you the ability to profit when prices are volatile and going down.
Disclosure: The author doesn’t have any positions in the stocks mentioned.
Amine Bouchentouf is a partner at Parador Capital LLC, an institutional advisory firm focused on commodities and emerging markets. He is the author of the best-selling “Commodities For Dummies,” published by Wiley. Amine is also the founder of Commodities Investors LLC, an advisory firm dedicated to providing insightful information on all things commodities. He can be reached at [email protected].