$UWTI explanation on upside

[Barchart.com]

I've been looking into UWTI, however I've never bought an ETN. From what I've read, it seems that most people use this for trading. I'm wondering if anyone could explain if crude oil went back to $80-90/barrel (2013-2014), why would this not reflect that and go back to up to the $400 dollar mark?

[BekasCMix]

If crude went to 80 a barrel within a week or two you would see a big spike. But you won't see it hit the 400's because there is a drag associated with the product. Not sure about UWTI but if it trades CL futures the drag will usually be much more (as they rotate front month futures into back month futures there will be drag whenever there is contango which is normally) than if there are just management fees. But ye these products all have a drag that brings them down over time to the point where they eventually have to do a reverse split so holding them for long periods will net a loss vs the product they are holding.

[bnlnhpuy99]

Yup the problem is the drag with any of these instruments, especially when they're levered like UWTI.

[bigqwhyv78]

Volatility drag makes it so you should only be trading these products. If you want to hold for an extended period of time, you may as well operate in the futures market.

[admin]

I actually wrote an article explaining the mechanics behind UWTI and the concept of volatility drag here (http://macro-ops.com/triple-levered-etfs-will-make-you-go-broke-even-if-youre-right?utm_campaign=Forums&utm_source=Online+Trader's+Forum&utm_content=Triple+Levered+ETF+Oil).