Horizon’s ETF’s this morning announced significant temporary changes to its BetaPro Crude Oil 2x Daily Bull ETF (TSX: HOU) and BetaPro Crude Oil -2x Daily Bear ETF (TSX: HOD) exchange traded funds, most significant of which is the temporary reduction to a 1x leverage on the products.
The temporary changes have been put in place largely as a result of the current volatility being experienced in the oil markets. Given that the funds are meant to represent a 2x leverage of whatever move oil makes in the day, if the price of oil were to move more than 50% in a single day, one of the two ETF’s should in theory see its net asset value drop to $0.00 as a result of the nature of the investment strategy.
In addition to dropping to 1x leverage, the fund is also changing its investing methodology. While normally it would invest in the front month oil contract until the 6th of the month, both ETF’s will now see their assets roll to the July contract effective at 2:30 today with 100% exposure. This is being done as a result of the current volatility in the June contract.
Lastly, as of April 21 the ETF’s will no longer be taking additional subscriptions until further notice. What this means in effect is that the ETF’s will trade more like a closed-end mutual fund rather than that of an ETF, as the equity may no longer trade in line with its net asset value.
The manager of the fund is expected to announce future roll dates as they happen, until such time that the ETF’s return to their intended normal operation.
A full explanation of how the fund is intended to work can be found here.
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As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.