This section is dedicated to energy ETFs or special investment funds whose securities are listed on the stock exchange in the same way as shares. Exchange Traded Funds allow their subscribers to focus on the energy sector. To do this, ETFs follow indices made up of shares of companies in the energy production and distribution sector. For more information on this particular type of instrument, please visit the page that discusses ETFs. Below you will find the main information on the main types of energy ETFs and how to trade online with this particular type of financial instrument.
Energy Oil ETFs
The most popular type of Energy ETF by far is certainly Energy Petroleum ETFs. This term refers to funds that have as their benchmark indices that include shares in companies that extract oil and in some cases, even distribute it. Among the most famous ETFs for oil energy are the OIH Oil Fund and the USO Oil Fund. OIH is an ETF that replicates the price and performance of the Market Vectors United States Listed Oil Services 25 Index (MVOIHTR). This index measures the overall performance of 25 publicly listed US companies in the oil services sector, i.e. oil services. As for the USO Oil Fund ETF, it is a commodity pool that contains shares of companies traded on the NYSE Arca and its objective is to replicate the exchange rates in percentage terms of the spot price of light and sweet crude oil, delivered in a given American market, as measured by the price changes of the same on the NYMEX (New York Mercantile Exchange).
Alternative Energy ETFs
These refer to those funds that have as reference benchmark indices that include shares of companies that produce energy from alternative sources to those of oil and gas, such as in the case of solar energy (in which case we will talk about Solar Energy ETFs) or renewable energy (in which case we will talk about renewable energy). In recent years, Clean Energy ETFs have become increasingly successful, i.e. those that highlight the actions of companies that are 100% eco-compatible. Alternative energy sources include wind, geothermal, hydroelectric, marine, solar and biomass energy.
The Best Energy ETFs
Among the best energy ETFs are the XLU and XLE. Combined in this way, they are not very difficult to remember. The XLU or Utilities Select Sector SPDR ETFs is a fund that aims to obtain results that match the performance of the Utilities Select Sector index of the S&P 500. This energy ETF includes industrial companies including energy producers, multi-utilities, energy traders, gas utilities, etc. The XLE is an ETF fund that seeks to replicate the performance of the Energy Select Sector Index, which includes industrial companies in the fields of oil, gas, consumable fuels, energy equipment, and services.
How to trade with Energy ETFs Online
There are two ways to trade energy ETFs. A traditional way, which requires access to the site of the fund administrator, and a much faster, easier and more practical way, which is by trading with Energy ETFs online through CFDs. CFDs are financial instruments that passively replicate the price of an underlying asset. In the case of CFDs on a given energy ETF, it will be given by the quotation of the same energy ETF, with the addition of a small spread percentage. This is the only form of retention and gain for the broker. CFDs are leveraged instruments, so you can trade on a much higher number of ETFs than you could do with traditional methods for the same budget. For CFD trading on energy ETFs, even small amounts are sufficient. Due to the high volatility of Gas ETFs, it should be remembered that even with CFDs the user is exposed to market risks, so profits and losses will vary the equity on the trading account. With Plus500, however, losses cannot exceed what is available on the trading account. In order to reduce risk, we recommend that you visit our Stop Loss article as part of our CFD course. With Stop Loss orders the user can set a maximum loss in percentage terms and order the platform to automatically close the position at a loss once the “alert” level is reached.
List of Energy ETFs
- Utilities Select Sector SPDR
- Energy Select Sector SPDR