UGL: 2x Daily Returns On Gold, But Be Careful Of Cycle

seekingalpha2024-06-21

ProShares Ultra Gold ETF is a daily leveraged play on Gold.If Gold trades sideways and volatile, the UGL ETF would not perform 2x as well as Gold.If Gold is in a secular bull trend, this is a geared ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUGL: 2x Daily Returns On Gold, But Be Careful Of Cycle\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-21 03:17 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4700228-ugl-2x-daily-returns-on-gold-but-be-careful-of-cycle><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>ProShares Ultra Gold ETF is a daily leveraged play on Gold.If Gold trades sideways and volatile, the UGL ETF would not perform 2x as well as Gold.If Gold is in a secular bull trend, this is a geared ...</p>\n\n<a href=\"https://seekingalpha.com/article/4700228-ugl-2x-daily-returns-on-gold-but-be-careful-of-cycle\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4700228-ugl-2x-daily-returns-on-gold-but-be-careful-of-cycle","article_id":"2445224913","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1312429037/image_1312429037.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2445224913","pubTimestamp":1718911055,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"ProShares Ultra Gold ETF is a daily leveraged play on Gold.If Gold trades sideways and volatile, the UGL ETF would not perform 2x as well as Gold.If Gold is in a secular bull trend, this is a geared way to play it for traders.   simonkr/E+ via Getty Images Gold. It’s shiny. It’s considered a store of value . Considered \"alternative.\" It’s non-correlated. And it can be leveraged without margin. Are you big on Gold?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","GLD":"SPDR黄金ETF","FDN":"First Trust Dow Jones Internet I","BK4550":"红杉资本持仓","BK4588":"碎股","UGL":"二倍做多黄金ETF(ProShares)","BK4504":"桥水持仓","BK4570":"地缘局势概念股"},"translate_title":"UGL：黄金每日回报率为2倍，但要小心周期","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GLD":1,"UGL":1,"FDN":0.9},"content_text":"ProShares Ultra Gold ETF is a daily leveraged play on Gold.If Gold trades sideways and volatile, the UGL ETF would not perform 2x as well as Gold.If Gold is in a secular bull trend, this is a geared way to play it for traders.   simonkr/E+ via Getty Images Gold. It’s shiny. It’s considered a store of value (something I disagree with by definition, given it has tail risk). Considered \"alternative.\" It’s non-correlated. And it can be leveraged without margin. Are you big on Gold? Personally, I am. I think we are entering a cycle where Gold does continue to perform well on a go-forward basis. If you agree, and want to juice up your returns, you may want to consider the ProShares Ultra Gold ETF (NYSEARCA:UGL) for a trade. I say for a trade purposely because this is not a fund to hold long term. The fund was created to provide investment results tracking the twice (2x) daily performance of the Bloomberg Gold Subindex. UGL was launched in December 2008, and is an exchange-traded fund, or ETF, designed to provide a leveraged return on the daily movements of gold’s price. At an expense ratio of 0.95 percent, and net assets of more than $215 million, it has found a niche among the many forms of geared products for allocators. A Look Into The Holdings When we look at the holdings, we see the fund does not actually own Gold directly. Rather, it owns futures contracts and swaps.   proshares.com Swaps are how the fund achieves its magnification. Swaps allow one party to hedge against a risk, manage its exposure to changes in an underlying asset (in this case, Gold), or borrow money. In the case of UGL, the swaps on the Bloomberg Gold Subindex are what create the daily 2x magnification without actual margin/borrowed month to leverage the exposure. Peer Comparison UGL is a leveraged play on gold, but it isn’t the only ETF that offers an opportunity to profit from rising gold prices. You might choose to invest in a more traditional, unlevered play like the SPDR Gold Shares (GLD), which mirrors the price of gold bullion (XAUUSD:CUR). When we look at the performance of UGL relative to GLD, we find that UGL has indeed outperformed due to the 2x leverage, but not by 2x because, of, well, the 2x leverage.   stockcharts.com Here’s the key. It’s more than just the fact that UGL is leveraged. It’s daily 2x leveraged. That means that the fund adds more leverage every day the fund goes up, but actually from a dollar leverage perspective adds less exposure when going lower. This is the challenge with all geared products. If the underlying asset see-saws, whereby it’s up one day, down one day, up another day, down another day, the 2x return actually hurts the compounded return. High volatility does not help leveraged products, whereby streaks in daily performance (characteristic of low volatility regimes) are beneficial. This is why a fund like this is meant for traders. If you’re in a long sideways volatile cycle, the leverage will erode the returns. If you’re in a smooth up trending market, it would conceivably perform better. Either way, it’s best for short-term traders, since you never quite know what cycle long-term you’re in. Pros and Cons So what are the positives? UGL adds magnified exposure to the directional moves of gold, leveraging the returns associated with a rising gold price. As a result, the ETF could appreciably amplify returns for traders with a bullish stance on gold. Even modest gains in the spot price could result in higher returns for UGL holders, so long as Gold’s daily price movement isn’t overly volatile. But it should also be understood that the same leveraging that boosts potential returns also increases the possibility of losses. In a bear market or during periods of heightened volatility, UGL’s leveraged exposure could put it at risk of taking even larger losses and perhaps losing a significant amount of capital. And crucially, the daily rebalancing that is part of leveraged ETFs’ design can cause performance to diverge from the underlying benchmark for long periods of time due to volatility decay. Please read the SEC Investor Bulletin on leveraged ETF risks before placing any trades. Conclusion  For the sophisticated trader interested in an aggressive leveraged play on moves in gold prices, the ProShares Ultra Gold ETF is worth considering. The ETF offers investors two times the daily performance of the Bloomberg Gold Subindex. For gold bulls with a high tolerance for volatility, that can make UGL a tactical maneuver to fill in specific holes in an otherwise well-diversified group of investments. Just be careful of the environment and volatility of Gold when playing with this.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.0","shortVersion":"4.30.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2445224913"}