VelocityShares 3x Long Crude Oil (UWT) is an exchange-traded note (ETN) issued by Citigroup Global Markets Holdings Inc. It is currently trading at $0.23 but was trading over $45 in 2018. It is one of many stocks that have been recently walloped by the Saudi oil price war.
Investors may consider buying UWT because oil prices are likely to come back, and many oil stocks will jump up. The answer NO. Sorry, but there many stocks that are down now because of the coronavirus that have a better chance of coming back.
UWT Update – Holders of the ETNs will receive a cash payment per ETN in an amount (the “Optional Acceleration Redemption Amount”) equal to the closing indicative value of the respective series of ETNs on the final valuation date of the Optional Acceleration Valuation Period. Last day of ETN trading is expected April 2nd, 2020.
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We have seen several lawsuits regarding UWT. If your financial advisor recommended that you invest in VelocityShares 3x Long Crude Oil ETN and you suffered investment losses, you should contact an experienced investment fraud lawyer and investigate these issues in more detail.
Haselkorn & Thibaut, P.A. is investigating potential securities fraud claims involving financial advisors who may have unsuitably recommended energy MLPs such as Ferrellgas Partners, LP to investors. UWT investors can call 888-628-5590 for a free case evaluation.
The risks associated with investments related to the energy industry should have also been reviewed, analyzed, and explained to the investor client.
The ETN provides investors with a cash payment at the scheduled maturity or early redemption based on the performance of the underlying index, S&P GSCI Crude Oil Index ER This investment intended to replicate, net of expenses, three times the S&P GSCI Crude Oil Index ER.
That index tracks a hypothetical position in the nearest-to-expiration NYMEX light sweet crude oil futures contract, which is rolled each month into the futures contract expiring in the next month. The value of the index fluctuates with changes in the price of the relevant NYMEX light sweet crude oil futures contracts. This ETN was formed on December 8, 2016, and it will mature on December 15, 2031.
In October 2018, the ETN was trading over $45.00, and after a decline in late 2018, it was generally trading between $10.00 and $20.00 through most of 2019 and into January 2020. Since then, it has declined significantly, trading below $5.00, and more recently, even under $1.00.
This is a leveraged ETN that uses financial derivatives to amplify the returns of the underlying index. This is generally considered a high-risk strategy that should not be approached by most as an investment.
Exchange-Traded Notes (ETNs) are a type of unsecured debt security that tracks an underlying index of securities and trades on a major exchange like a stock would trade. ETNs are similar to bonds but do not pay interest payments. Instead, the price fluctuates similarly to a stock price.
A financial institution typically issues ETNs to base returns on a market index. At maturity, the financial institution takes out fees and gives the investor cash based on the return of the index it is tracking. ETNs do not represent investor ownership of the securities but are merely paid a performance based on what the underlying index produces. The investors must trust that the issuing financial institution will make good on the return based on the underlying index.
Barclays Bank PLC first issued ETNs, and now many other issuers have entered the market, they are typically issued at $50.00 per share. Risks include but are not limited to an index that goes down (or does not go up enough to cover the fees), and the investor will receive a lower amount at maturity than what was initially invested.
The ETN’s ability to pay back the principal, plus any gain from the index being tracked, depends on the financial viability of the issuer. As a result, an ETN’s value is impacted by the credit rating of the issuer, and a downgrade in the credit rating of the issuer can cause a price decline even without a change in the underlying index. Additional risks include default risk, closure risk if the ETN can be closed before the maturity date. There could also be tracking risks, including tracking errors and other risks.
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