Tuesday, February 23, 2010

Beware incorrect ETF recommendations (DUG, DTO)

You'd think a site called "ETF Prodigy" would at least know the proper Exchange Traded Fund to short oil.

They suggest that if you want to capitalize on falling oil prices, you should buy DUG:  

Their MASSIVE error is that while their premise is declining oil prices, the instrument they use is DUG, which will give you short exposure to the Dow Jones US Oil And Gas Index rather than oil the actual commodity.  This index is a double short, so it gives you double the inverse performance of the DJ Oil and Gas Index, of which over 37% consists of XOM and CVX (top holdings below).  If oil tanks, these stocks may or may not drop to the same degree.  For pure crude exposure, DTO is a direct inverse play on downside in the commodity price.

Copyright 2010 AlphaNinja

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