TradingMarkets Everything You Need to Know about Trading ETFs: DIG and DUG
Two of the most widely traded oil-related exchange-traded funds are also two of the most misunderstood by many traders and investors new to ETFs.
One of the best ways for stock and ETF traders to take advantage of rising and falling commodity prices is by way of commodity stocks and exchange-traded funds. If you like (or don’t like) gold, then trading and investing in gold stocks or gold ETFs is one way to put your money where your mind is. And similarly, if think crude oil is headed higher — or still lower, then trading and investing in oil related stocks or ETFs is one of the best games in town.
The ProShares Ultra Oil & Gas ETF, DIG
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Note that again, DIG and DUG track stocks, not the price of oil. And while most of the time what is good for the price of crude oil is good for the values of oil service stocks, the two do not always move together and traders and investors who buy or sell short DIG and DUG should be sure they know just which market they are trading or investing in — or against.
In fact, both of these ProShares ETFs track the Dow Jones U.S. Oil & Gas Index, an index that includes Exxon Mobil
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Both DIG and DUG are leveraged two-to-one. In addition, DUG is a short fund that tracks the inverse of the Dow Jones U.S. Oil & Gas Index. Leverage, as traders and investors should be aware, is a double-edged sword. The same leverage that can bring outsized gains and bring larger than expected losses.
DIG trades on average approximately 25 million shares a day. Its inverse counterpart, DUG, trades just under 21 million shares a day on average.
Whether you are trading or investing, hedging or speculating, if you are looking for exposure to some of the biggest oil stocks in the United States, DIG and DUG are two exchange-traded funds worth knowing more about.
For more information about the ProShares Ultra Oil & Gas ETF, DIG, and the ProShares UltraShort Oil & Gas ETF, DUG, visit the ProShares website at https://www.proshares.com
Coming next: The SPY is the most widely traded exchange-traded fund on the market. Monday’s TradingMarkets Everything You Need to Know about Trading ETFs will look at the SPY as well as some of its short and inverse ETF relatives!
According to a recent report, eight out of ten securities traded are exchange-traded funds. Want to learn how to trade them? Click here to find out what traders are saying about Larry Connors’ new book, Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs!
David Penn is Editor in Chief at TradingMarkets.com.