BOIL: A Deeply Flawed ETF For Investors

Elliott Gue
6.24K Followers

Summary

  • BOIL is an exchange-traded fund (ETF) designed to produce returns equal to twice the daily performance of the Bloomberg Natural Gas Subindex.
  • Currently, BOIL's underlying index tracks the September 2023 gas futures and will roll to the November contract in August and the January 2024 contract in October.
  • The longer-term outlook for gas prices is bullish, but the short-term prospects are mixed and prices for November 2023 and January 2024 futures already reflect significant price upside.
  • BOIL suffers from compounding risk meaning that while daily returns will track twice those of the underlying index, returns over longer holding periods can deviate from the benchmark significantly.
  • Summer heat drives gas demand for electricity generation, but we're running out of time for the weather to improve the supply/demand balances for gas this summer.

Blue gas flame from silver pipe in dollar sign shape

PaulFleet/iStock via Getty Images

As outlined in the fund prospectus, the ProShares Ultra Bloomberg Natural Gas (NYSEARCA:BOIL) exchange-traded fund (ETF) is designed to produce returns of twice (2x) the daily performance of the Bloomberg Natural Gas Subindex.

In turn, the Bloomberg

This article was written by

Elliott Gue
6.24K Followers
Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams. For seven years, Elliott Gue shared his expertise and stock-picking abilities with individual investors through a highly regarded, energy-focused research publication. Elliott Gue’s knowledge of the sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.” He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. In October 2012, Elliott Gue launched the Energy & Income Advisor (www.EnergyandIncomeAdvisor.com), a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships. Roger Conrad also contributes analysis of master limited partnerships and Canadian energy stocks to the publication. The masthead may have changed, but subscribers can expect the same in-depth analysis and rational assessments of investment opportunities in the energy sector.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SWN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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