How exactly do ETNs work?

Discussion in 'Stock Market Education' started by turt, Jan 28, 2015.

  1. turt

    turt Guest

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    For instance UWTI is 3x long crude oil that has gone down to just about nothing as the price of oil has fallen. Will this ETN become worthless or will it always have some value? And I'm guessing it can never go up as high as it once was.

    I'm really confused how these things work...
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I'm not a fan of those that are "3 times this" or "2 times that" or whatever. That's a good indicator that they are probably heavily leveraged and probably dangerous to fool around with.

    Those should be handled with great care with a limited amount of $ for limited time periods if at all.

    I'd stick to those that simply buy and hold something (or that perhaps take a simple short position against something) with available cash on hand.
     
  3. turt

    turt Guest

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    It mentions that many times on the info sheet (should only be traded short term)! I just wish I understood it better so even if I use a small amount of money, I can make a wise bet. This ETN actually went up 20% on market close on Friday.
     
  4. Colebra

    Colebra Well-Known Member

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    Just read the definition on Infopedia, and still didn't get it...

    Are you buying into the debt of a company, or a group of companies?
    If you could explain this in dumb terms, I'd sure appreciate it....

    Thanks!
     
  5. crimsonghost747

    crimsonghost747 Senior Investor

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    Don't have the time to check the ticker. But usually a 3x long crude is a fund consisting of multiple futures contracts and possibly some small % in other things such as currencies. Basically what they have tried to build is something that reacts 3x to the change in the price of crude oil. Obviously this goes both ways. Oil jumps 1%, this 3x long crude jumps 3%. Oil drops 3%, this drops 9%.

    High leverage, high risk and I would be very careful about leaving one in your portfolio overnight. I play around with some 2x stuff but daytrades only and with very little capital since it's a leveraged product.
     

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