SCO 2x Short
ProShares UltraShort Bloomberg Crude Oil
Shorts: Crude Oil (USO)
Expense Ratio
0.95%
Leverage
2x Inverse
Issuer
ProShares
Inception
Apr 2008
High Risk Leveraged Product
SCO is a 2x leveraged inverse ETF designed for short-term trading only. Daily rebalancing causes significant decay over time. NOT suitable for buy-and-hold investors.
What SCO Shorts
ProShares UltraShort Bloomberg Crude Oil (SCO) seeks daily investment results that correspond to -2x the daily performance of the Bloomberg WTI Crude Oil Subindex. This index tracks the price of West Texas Intermediate (WTI) crude oil futures contracts.
SCO achieves its inverse exposure through swap agreements and futures contracts on crude oil. When oil prices fall, SCO is designed to rise at twice the rate — and vice versa. Because it tracks futures rather than spot oil prices, SCO is also affected by the shape of the oil futures curve (contango or backwardation), which can create additional drag or tailwind beyond the spot price movement.
Key Risks
- Compounding Risk: Daily reset causes performance to diverge from -2x the index's return over periods longer than one day, especially in choppy or volatile oil markets.
- Commodity Volatility: Crude oil is one of the most volatile commodities, driven by OPEC decisions, geopolitical conflicts, supply disruptions, and global demand shifts. This amplifies both gains and losses.
- Futures Roll Cost: SCO tracks oil futures, not spot prices. When the futures curve is in contango (common for oil), rolling contracts forward creates a persistent drag on returns.
- Leverage Risk: The 2x exposure means a sharp oil price rally can cause rapid, outsized losses in a single session.
- Expense Ratio (0.95%): While lower than some leveraged ETFs, the cost still compounds against holders over time.
Best Use Cases
- Short-Term Oil Hedging: Traders with long exposure to energy stocks or oil-linked assets can use SCO to hedge against a near-term drop in crude prices.
- Geopolitical Event Trading: Active traders may use SCO to position for expected oil price declines following supply increases, demand shocks, or OPEC policy changes.
- Tactical Bearish Bets: Day traders and swing traders who anticipate a short-term pullback in crude oil prices after a rally or ahead of inventory data releases.