Horizons ETFs has made a change to the BetaPro Crude Oil Leveraged Daily Bull ETF (HOU) and the BetaPro Crude Oil Inverse Leveraged Daily Bear ETF (HOD) by reintroducing the use of 2.0 times and -2.0 times leverage, respectively.
HOU will snow eek to deliver 2.0 times the daily performance, and HOD will seek to deliver 2.0 times the inverse (opposite) of the daily performance, of the Horizons Crude Oil Rolling Futures Index.
In July 2020, the investment objectives of HOU and HOD changed. The new investment objectives changed the Index used by the ETFs, and allowed adjustment of the leverage ratio employed by the ETFs to provide up to 2.0 times (200 per cent) (HOU) and up to -2.0 times (-200 per cent) (HOD), the daily performance of the exposure to the Index.
As a result of further stabilisation of crude oil futures prices and negotiations with the ETFs’ counterparties, the Manager has determined that it will reintroduce the 2.0 and -2.0 times leverage, as applicable, to the exposure of the ETFs. This means, on and after January 20, 2020 and until further public notice is provided by Horizons ETFs, HOU and HOD will provide 2.0 times and -2.0 times, respectively, the exposure to the Index.
In addition, effective the close of business January 20, 2021, the Index roll methodology will change so that the crude oil futures exposure will roll to the next contract over a newly introduced four-day roll process that starts on the day after the front month contract expires. For this month, that means that the underlying crude oil futures exposure for HOU and HOD will roll from the March 2021 contract to the April 2021 contract commencing on January 21, 2021. This change to the Index roll methodology does not affect the leverage ratio that HOU and HOD will employ.
This will be the first time since the investment objective changes in July 2020 that HOU will use 2.0 times, and HOD will use -2.0 times, daily leverage and that the Index exposure will have a multi-day roll period.
The Manager anticipates, under normal market conditions, managing the leverage ratio to be as close to 2.0 times or -2.0 times as practicable for both HOU and HOD, respectively. However, the Manager may, at its sole discretion, change the leverage ratio based on its assessment of the current market conditions for crude oil futures contracts and negotiations with the ETFs’ counterparties at that time.
The roll methodology for the Index (which includes roll dates, the primary and secondary futures contracts, and the allocation between the primary and secondary futures contract) may also be changed at any time by the Manager in its sole discretion based on, among other things, negotiations with the ETFs’ counterparties, liquidity for the underlying primary and secondary futures contracts as the primary futures contract’s expiry approaches.
