Q: Is there an ETF where you can short crude oil on a longer term basis? What would likely happen if you purchased this ETF if the price of crude hit $105 and you held it for a few months and theoretically the crude price dropped to $80. Would this ETF work for a longer period of time or is it only meant for short term fluctuations? Do you have any other ideas for this type of trade without using futures?
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5i Research Answer:
Leveraged ETFs should only be used for day trades. There really is not another solid option for longer term bets. One could short USO as a general bet against oil. Oil hit $120 today. A 25% decline in oil would likely see HOD rise 40%+. But HOD has a 49% NEGATIVE 5-year return. Moves such as on Monday can really take the wind out of its sails.