October 19, 2021

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Get Ready for Energy Sector Moves With These ETFs

This article was originally published on ETFTrends.com.

Whether traders want to be bulls or bears, there’s always action brewing in the energy sector, which makes a pair of leveraged ETFs from Direxion Investments a prime option.

The energy sector has undergone recovery, but that could have already reached a zenith this year. Once powered by mostly the action in oil prices, the energy sector is undergoing its own renaissance of sorts.

Renewable energy is starting to become a bigger piece of the energy sector pie. Alternate energy sources are also getting a boost from the federal government, giving the green energy movement an added push.

“The energy sector has stumbled a bit after recovering to near pre-pandemic levels earlier this summer,” a Direxion Investments The Xchange article noted. “With a new White House administration emphasizing renewable energy and uncertainty in the status of global reopening plans, the U.S. energy sector doesn’t exactly know where it’s headed.”

While transformative, the green transition won’t happen overnight.

“Energy companies see the writing on the wall when it comes to carbon emissions sensitivity and many have released plans to be net carbon zero by 2050,” the article said. “This shift, however, won’t come quickly, and there will be winners and losers along the way. Picking those winners and avoiding the losers can be a lucrative but challenging proposition for traders. Instead, it may make more sense to look at the movement of the energy sector as a whole.”

Two Options for Both Sides

For the bulls, there’s the Direxion Daily Energy Bull 3X Shares (ERX), which seeks daily investment results equal to 200% of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector, which includes the oil, gas, and consumable fuels industries, as well as energy equipment and services.

On the bearish side, there’s the Direxion Daily Energy Bear 2X Shares (ERY). ERY seeks daily investment results of 200% of the inverse of the daily performance of the Energy Select Sector Index. The fund invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).

So far this year, the bulls are in the obvious lead, but daily fluctuations in the energy sector can make a case for both sides.

ERX Chart

ERX Chart

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