ETF provider reintroduces original leverage amounts and updates index roll methodology
Nearly six months after updating it updated the investment objectives to its BetaPro Crude Oil Leveraged Daily Bull ETF (HOU) and the BetaPro Crude Oil Inverse Leveraged Daily Bear ETF (HOD), Horizons ETFs has brought the leveraged and inverse ETF strategies back to their original exposure levels.
Following the market close for crude oil futures yesterday, Horizons reintroduced the use of 2 times and -2 times leverage to HOU and HOD, respectively.
In July 2020, Horizons announced a change to the investment objectives of HOU and HOD. Aside from being updated to follow the Horizons Crude Oil Rolling Futures Index, the two ETFs were changed so that they provided up to 2x and up to -2x the daily performance of the exposure to the index, respectively. Previously, the exposure they provided had been fixed at 2x and -2x.
“As a result of further stabilization of crude oil futures prices and negotiations with the ETFs' counterparties, the Manager has determined that it will reintroduce the 2.0 and -2.0 times leverage, as applicable, to the exposure of the ETFs,” Horizons said in a statement.
In April last year, Horizons had to suspend new subscriptions to HOU and HOD after unprecedented market conditions caused price dislocations in the two ETFs.
The firm added that, effective the close of business on January 20, the roll methodology for the index will change. Its crude oil futures exposure will roll to the next contract over a newly introduced four-day roll process that starts on the day after the expiration of the front month contract.
“The Manager anticipates, under normal market conditions, managing the leverage ratio to be as close to 2.0 times or -2.0 times as practicable for both HOU and HOD, respectively,” Horizons said, adding that it may change the leverage ratio based on its assessment of conditions in the market for crude oil futures contracts and negotiations with the ETFs’ counterparties at that time.
