As international oil prices surged on the back of the Middle East war, returns on oil leverage exchange-traded notes (ETNs) topped 100% in 10 days. With outlooks pointing to continued gains in oil prices for the time being, a flood of investment is pouring in.
According to the Korea Exchange (KRX) on the 15th, in the period from on the 3rd to the 13th after clashes among the United States, Israel, and Iran intensified, the average daily transaction value of "KB S&P Leverage WTI Crude Oil Futures ETN B" came to 2.947 billion won. That is more than five times the 573 million won average transaction value of the previous two weeks.
The transaction value of "KB S&P Leverage WTI Crude Oil Futures ETN B" in particular rose to 6.466 billion won on the 10th, when oil prices broke through $100 per Barrel. It marked the highest level in about nine months.
Returns are also steep. The ETN's share price jumped more than twofold, from 24,950 won on Feb. 27 to 52,945 won on the 13th.
Major leverage products also all posted returns of over 100%, including "Meritz Solactive 2X WTI Crude Oil Futures ETN(H)" (105.6%), "Samsung Leverage WTI Crude Oil Futures ETN" (113.4%), and "Hana S&P Leverage WTI Crude Oil Futures ETN B" (115.9%).
By contrast, inverse products, which make revenue whenever oil prices fall, logged losses of around -60%.
Shares of products such as "KB S&P Inverse 2X WTI Crude Oil Futures ETN B" (-58.6%), "Meritz Solactive -2X WTI Crude Oil Futures ETN(H)" (-61.0%), and "Hana S&P Inverse 2X WTI Crude Oil Futures ETN B" (-59.5%) fell by more than half.
The market says products that bet on rising oil prices will likely extend their gains, but advises caution given the high geopolitical uncertainty. If oil price volatility becomes extreme, the gap between a product's intrinsic value and its market price can widen.