Amid the conflict in Iran, oil prices have skyrocketed, leaving consumers with potential pain at the pump, though it creates an opportunistic environment for savvy traders. Ongoing supply disruptions and a resurgence in industrial activity should provide even more bullish catalysts. Any temporary price pullbacks could also create profitable trades for those looking to capitalize on short-term weakness after prices touch highs.
For tactical traders, this volatile environment requires tools such as leveraged and inverse exchange-traded funds from Direxion. More specifically, the Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X ETF (GUSH ) and Direxion Daily S&P Oil & Gas Exploration & Production Bear 2X ETF (DRIP ) are essential for navigating this short-term volatility.
2x Momentum or Sell The Peak
As CNBC noted, oil prices have already risen 14% in the early trading week. This is ideal for GUSH, which is tailor made for traders with a high-conviction outlook that oil prices will remain on their upward trajectory. The fund delivers 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index (SPSIOPTR).
The index provides exposure to U.S. companies from the oil and gas exploration and production sub-industry for a broad sector play. These companies are sensitive to the price of rising oil prices, benefiting from the increased demand.
As traders accustomed to gaming the energy sector are aware, prices can shift quickly. DRIP can be beneficial when looking for opportunities in temporary pullbacks or mean reversion events thanks to its inverse exposure to the SPSIOPTR. If traders have high conviction that oil prices have become overextended or they anticipate a sudden increase in global supply, DRIP can benefit from a price correction.
Singled Out: Exxon
Traders looking for more targeted 2x exposure can take advantage of rising prices in Exxon Mobil. More specifically, the Direxion Daily XOM Bull 2X Shares (XOMX ) can serve this purpose. Likewise, as oil prices pull back, the Direxion Daily XOM Bear 1X Shares (XOMZ ) can provide exposure to the bearish side of the oil giant’s price sensitivity.
The energy sector is already having a strong year and headlines related to geopolitical friction can only support the bullish case further. As mentioned, however, the sector is prone to heavy volatility, so having the ability to pivot between bullish and bearish stances is necessary. GUSH, DRIP, XOMX, and XOMZ give traders that much-needed versatility.
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