As it pertains to what I covered here on the ETF Focus blog throughout 2020, two main themes emerged - oil and Robinhood.
The big trigger for oil, of course, was the crude oil crash back in April. As the coronavirus was starting to become a larger problem and parts of the economy began to shutter for the first time, the demand for oil and other energy products fell through the floor. After all, if the airline and travel industries were going to be virtually non-existent (and more people began working from home), where was the demand for energy products going to come from?
The oil exchange-traded product space faced a similar near catastrophe. The iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), one of the largest oil products at the time, closed completed on April 30th. Several other smaller funds also closed. USO and UCO, the two most popular, barely hung on.
Robinhood became the go-to trading platform for your younger folks, but it was the website RobinTrack that generated the most buzz among industry players. That's the site that provided insight into what these folks were trading and became ultra-popular among market watchers for trying to determine current trends. Robinhood shut down transparency into this data earlier this year, so RobinTrack no longer functions, but there are rumors it may return in some form at some point in the future.
Those topics and others made it a big year for ETF Focus On TheStreet. In case you missed any of them, I wanted to recap the biggest stories we covered here in 2020. Feel free to click on any of the links below to read the original article.
In the first half of 2020 as the businesses, schools and other establishments remained closed, the biggest question was when were they going to reopen. Market watchers waited for that indication as a sign that the economic recovery could be upon us.
In May, Dr. Fauci, who had been taking a very conservative tone with regard COVID-19, finally took a more pro-business stance and indicated that it was finally the time to begin looking at striking a balance between safety and returning to life as normal.
This became my most read story of 2020.
I ended up publishing a number of pieces right as the oil market was plummeting. For a while, it was all I wrote about and was sometimes publishing multiple pieces a day just in order to keep up.
UCO, which is the ProShares Ultra Bloomberg Crude Oil ETF, a fund that applies 2x leverage to oil futures contracts, nearly shuttered altogether. It needed to execute a 1:25 reverse split just to keep its share price above the level needed to meet exchange listing requirements.
Today, UCO is alive and well again as crude oil prices eventually returned to a normal range. It currently has about $1 billion in assets.
USO, the United States Oil Fund, needed a similar action to survive. It "only" required a 1:8 reverse split, but managed to survive the crash. It has more than $3 billion in assets right now.
USO also made news in 2020 for completely restructuring the fund's mandate. It originally targeted only the nearest expiration oil futures contracts. Following the crash, it expanded its scope to include multiple expirations up to and including a full 12 months out. It also added the ability to bet on gasoline, natural gas and other energies (although it still focuses mostly on oil).
All of this was done to diversify risk away from another similar event, but it ended up diluting itself in the process.
This was a complete deviation from the ETF theme of the site, but one I felt compelled to comment on. Apparently, readers agreed.
Robinhood investors are, generally speaking, big risk takers, almost to a fault. Oil funds, leveraged VIX ETFs and other ultra-risky securities frequently topped the site's most traded list.
Hertz, as it was filing for bankruptcy, was one such stock. Robinhooders piled in as the stock was headed for $0, something I had trouble wrapping my head around.
At the end of October, Hertz was officially delisted from the New York Stock Exchange. Hertz now trades under the ticker HTZGQ on the pink sheets. It's currently trading at around $1.50, so it's technically still alive but definitely on life support.
GUSH and DRIP, the pair of bull/bear leveraged ETFs based on the S&P Oil & Gas Explorers & Producers Index, were also impacted by the oil market crash. Not quite as popular as USO and UCO for gaining exposure to oil prices, I made the argument that they could also be at risk for closing altogether.
They didn't, but they did change from 3x leverage to 2x leverage in response to market conditions. Both fund are smaller than they once were, but it's mostly back to business as normal.
As mentioned before, Robinhooders are risk takers, so the leveraged UCO was right up their alley. When data was readily available, UCO was routinely among the top 30 or 40 positions held by Robinhood traders and was often among the most frequently traded.
The VelocityShares Daily 2x VIX Short Term ETN (TVIX) was another heavily traded product on Robinhood. But this story was interesting in two parts. First, because traders were so eager to roll the dice on adding leveraged volatility exposure to their portfolios and, second, because Credit Suisse, the note's issuer, decided to distance themselves from it altogether.
I'd encourage you to read Dave Nadig's excellent article on the backstory of TVIX if you're interested in getting into the details, but the juxtaposition of Robinhooders being so interested while Credit Suisse was so disinterested at the same time is entertaining.
I got a lot of comments on oil funds back in March and April when there was so much volatility. Several readers pointed out that negative oil prices would only be a temporary phenomenon and oil prices, and corresponding oil funds, would inevitably go back up.
Oil prices did rebound, but the nature of these funds isn't that they're directly tied to oil prices. They're invested in oil futures contracts which expire and need to be rolled over among other quirks. Some readers were very bullish on USO and I felt the need to encourage some of them to temper expectations a bit.
Same thing as above but for UCO. One reader made a case for why an uber bull market in oil was near and why UCO was the way to play it. For the record, UCO is still trading at around $36 a share, an increase from when this article was published, but nowhere near his extravagant price target.
Another piece I wrote around the time that leverage VIX products were becoming a big thing. Interest in these has come down to earth a bit, but I question, as always, if Robinhood traders truly knew what they were getting involved with.