Investing Assets & Markets Exchange-Traded Funds How Major Oil ETFs and ETNs Can Help Hedge Against Investment Risk By Mark Kennedy Mark Kennedy Mark Kennedy is an expert in investment and exchange-traded funds. He was an ETF options trader on the Philadelphia Stock Exchange floor and Vice President of Derivatives Trading for Goldman Sachs. Kennedy's trading positions were not limited to the oil ETF but included other ETFs such as the Qs. learn about our editorial policies Updated on October 4, 2021 Reviewed by Thomas J. Brock Reviewed by Thomas J. Brock Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities. learn about our financial review board Share Tweet Pin Email Photo: Pramote Polyamate/Getty Images Want to gain exposure to oil as a commodity or as a sector? You may want to consider an oil exchange-traded fund (ETF) or an exchange-traded note (ETN). These products can also help to hedge your oil risk vulnerability from other holdings. A few of the funds provide inverse exposure to indexes that track the performance of large U.S. oil and gas companies. In other words, these inverse ETFs are likely to be up when oil stocks are down. In general, ETFs and ETNs can have several benefits for your portfolio. Below, you'll find a list of products to point you in the right direction, but make sure to further research the funds before deciding whether any of these assets should be a part of your investing strategy. ETFs vs. ETNs Both ETFs and ETNs are structured similarly to mutual funds. The investment product is composed of a pool of underlying securities that track a related index. Unlike mutual funds, ETFs and ETNs trade on exchanges like stocks. Their prices will fluctuate throughout the trading day, and investors can buy or sell shares any time the markets are open. Like mutual funds, both products will have expenses or fees related to their professional management. However, these costs will usually be lower than those of a comparable mutual fund. Note As an example of these lower costs, the capital gains on ETFs and ETNs will only be assessed when you sell shares. Mutual fund investors will incur taxes based on the trading activity of the mutual fund, rather than how an individual trades their shares in the mutual fund. The primary difference between an ETF and an ETN is that the underlying ETN basket is made up of unsecured debt securities. That means ETNs face both market risk and the credit risk of the investment bank issuing them, whereas ETFs only face market risk. As a result, ETFs are often considered relatively lower-risk investments. ETNs also are less liquid than ETFs. Major Oil ETFs and ETNs The following list includes a selection of funds and notes that are actively trading. This list is current as of September 6, 2021, but make sure to do your own research. ETFs and ETNs are constantly in flux, so a product here may have since changed its name, ticker symbol, goals, or holdings, or it may have been removed from the market altogether. As mentioned above, not all of these ETFs and ETNs track oil indexes directly. Some are inverse products, which essentially short the underlying index. Others are leveraged products, which seek to outperform the underlying index by two or three times its daily returns, which can be very risky. Note Always check an ETF's goals and holdings before adding it to your portfolio. Consider reviewing your selection with a financial advisor before moving forward with the investment. USO: United States Oil Fund ETF USL: United States 12 Month Oil Fund ETF DBO: Invesco DB Oil Fund ETF UCO: ProShares Ultra Bloomberg Crude Oil ETF (2x) SCO: ProShares UltraShort Bloomberg Crude Oil ETF (-2x) FRAK: VanEck Vectors Unconventional Oil & Gas ETF OIH: VanEck Vectors Oil Services ETF DDG: ProShares Short Oil & Gas ETF (-1x) OIL: iPath Series B S&P GSCI Crude Oil Total Return Index ETN BNO: United States Brent Oil Fund ETF DUG: ProShares UltraShort Oil & Gas ETF (-2x) OLEM: iPath Pure Beta Crude Oil ETN DRIP: Direxion Daily S&P Oil & Gas Exp. & Prod. Bull and Bear 2X Shares ETF (-2x) GUSH: Direxion Daily S&P Oil & Gas Exp. & Prod. Bull and Bear 2X Shares ETF (2x) CRAK: VanEck Vectors Oil Refiners ETF OILK: ProShares K-1 Free Crude Oil Strategy ETF FTXN: First Trust Nasdaq Oil & Gas ETF IEZ: iShares U.S. Oil Equipment & Services ETF USOI: Credit Suisse X-Links Crude Oil Shares Covered Call ETN IEO: iShares U.S. Oil & Gas Exploration & Production ETF The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Office of Investor Education and Advocacy. "Mutual Funds and ETFs: A Guide for Investors," Page 8. Fidelity Investments. "ETF vs. Mutual Funds: Cost Comparison." Office of Investor Education and Advocacy. "Investor Bulletin: Exchange Traded Notes." Fidelity Investments. "Exchange-Traded Notes." Office of Investor Education and Advocacy. "SEC-FINRA Investor Alert on Leveraged and Inverse ETFs."