ProShares Ultra Basic Materials (UYM)

Overview

The ProShares Ultra Basic Materials (UYM) seeks daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones U.S. Basic Materials Index. It invests in a variety of basic materials companies, aiming to amplify their daily performance.

Reputation and Reliability

ProShares is a well-known issuer of leveraged and inverse ETFs, with a strong track record of providing such products.

Management Expertise

ProShares specializes in leveraged and inverse ETFs, indicating expertise in managing complex derivatives and tracking daily performance.

Goal

To seek daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones U.S. Basic Materials Index.

Investment Approach and Strategy

Strategy: The ETF uses a leveraged strategy, aiming for 2x the daily performance of its underlying index. This is achieved through derivatives such as swap agreements.

Composition The ETF holds a combination of financial instruments, primarily derivatives such as swap agreements, to achieve its leveraged exposure to the basic materials sector.

Market Share: UYM holds a small market share within the broader leveraged ETF market, and within the basic materials sector ETFs.

Total Net Assets (AUM): 62884165

Key Competitors

• XLB
• IYM
• FXZ

Competitive Landscape

The basic materials ETF market is dominated by unleveraged, broad-based ETFs like XLB. UYM's leveraged nature makes it a niche product. Its advantage is the potential for amplified daily gains, but its disadvantage is increased risk and volatility, and the impact of compounding over longer periods can deviate significantly from 2x the index return.

Historical Performance: Past performance is not indicative of future results. Due to its leveraged nature, historical performance can be highly volatile and may not reflect the performance of the underlying index over longer periods. Requires a high degree of active management.

Benchmark Comparison: UYM's performance should be compared to 2x the daily performance of the Dow Jones U.S. Basic Materials Index. Deviations are expected due to fees, expenses, and compounding effects.

Expense Ratio: 0.95

Average Trading Volume

The ETF's average trading volume is moderate, which can impact the ease of buying and selling shares, especially in large quantities.

Bid-Ask Spread

The bid-ask spread is generally wider than non-leveraged ETFs, reflecting the increased cost of trading due to its derivative-based strategy.

Market Environment Factors

Economic growth, commodity prices, interest rates, and global trade policies significantly impact the basic materials sector and, consequently, UYM's performance.

Growth Trajectory

UYM's growth is tied to the performance of the basic materials sector and investor appetite for leveraged products. Strategy changes are unlikely, but holdings will be adjusted to maintain the 2x leverage ratio.

Competitive Edge

UYM's advantage lies in its leveraged exposure, offering the potential for amplified daily returns for investors with a short-term, tactical outlook. It caters to investors seeking to capitalize on short-term movements in the basic materials sector. ProShares' experience in managing leveraged ETFs and the focused strategy provide UYM with a competitive advantage within its niche. However, the leveraged nature also introduces higher risk and complexity.

Volatility

UYM exhibits high volatility due to its leveraged nature, making it unsuitable for risk-averse investors. Daily resets can significantly impact long-term returns.

Market Risk

UYM is subject to the market risk associated with the basic materials sector, including fluctuations in commodity prices, supply and demand, and global economic conditions.

Ideal Investor Profile

UYM is suitable for sophisticated investors with a high-risk tolerance and a short-term trading horizon, who understand the complexities of leveraged ETFs.

Market Risk

UYM is best suited for active traders seeking to capitalize on short-term movements in the basic materials sector, not for long-term investors or passive index followers.

The ProShares Ultra Basic Materials ETF (UYM) provides leveraged exposure to the basic materials sector, aiming for two times the daily performance of its underlying index. This leveraged approach can amplify gains but also magnifies losses, making it a high-risk investment. UYM is appropriate for short-term, active traders who understand the complexities of leveraged ETFs and are looking to capitalize on short-term movements. Investors should carefully consider their risk tolerance and investment horizon before investing in UYM due to its volatility and potential for significant losses.

Data Sources:

• ProShares Website
• ETFdb.com
• Morningstar
• Bloomberg

Disclaimers:

The data and analysis provided are for informational purposes only and do not constitute investment advice. Past performance is not indicative of future results. Investing in ETFs involves risk, including the potential loss of principal. Leveraged ETFs are particularly risky and should be carefully considered before investing.