The notes were designed to take advantage of potential contango in the oil and natural gas markets while minimizing the exposure to absolute changes in the underlying prices of these commodities.
According to the release, the ETRACS Natural Gas Futures Contango ETN , which began trading under the ticker GASZ, is linked to the performance of the ISE Natural Gas Futures Spread Index. Through a series of investments in natural gas sub-indexes, the index provides short exposure in front month natural gas futures contracts and long exposure in far-term natural gas futures contracts.
The ETRACS Oil Futures Contango ETN, which began trading under the ticker OILZ, is linked to the performance of the ISE Oil Futures Spread Index, which provides a 1x short exposure in front month oil futures contracts and a 1.5x long exposure in mid-term oil futures contracts through a series of investments in oil sub-indexes.
“We have seen the effects of contango and negative roll yield on the returns of futures-based commodity exchange-traded products,” said Christopher Yeagley, Managing Director and U.S. Head of Equity Structured Products. “Now investors have the opportunity to take advantage of the term structure for each of these respective futures markets, without taking a directional view in the underlying commodity.”