Why Leveraged Commodity ETF Products Captured Investor Attention Through 2022

The commodity markets experienced extraordinary turbulence in 2022, triggering substantial investor interest in leveraged commodity ETF instruments as a way to amplify exposure to price movements. With agricultural and energy prices climbing to multi-year highs following supply chain disruptions and the Russia-Ukraine conflict, traders sought ways to magnify returns through leveraged vehicles. However, these instruments represent high-risk, high-reward opportunities that demand careful consideration and risk management strategies.

Understanding Leveraged Commodity ETF Mechanics During Supply Shocks

Commodity prices surged following the COVID-19 pandemic due to port congestion, logistics bottlenecks, and elevated global demand. The geopolitical crisis involving Russia and Ukraine intensified this pressure substantially. Russia and Ukraine collectively control roughly one-third of global wheat and barley exports, along with approximately one-fifth of the corn trade. On the energy front, Russia supplies roughly 17% of worldwide natural gas production, 12% of global oil output, and represents 40% of Europe’s natural gas imports. The nation also produces approximately 7% of global nickel, 6% of mined aluminum, about 3.5% of copper supplies, and approximately 2.2% of zinc production—making it a critical node in commodity supply chains.

The Bloomberg Commodity Index (BCOM), which tracks futures across oil, natural gas, industrial metals including copper and aluminum, and agricultural commodities like soybeans and wheat, reached a multi-year peak around mid-March 2022 before moderating as peace negotiations offered some relief to market participants. During this period of market volatility, leveraged commodity ETF products became increasingly attractive to bearish and bullish traders alike. These instruments enable investors to access commodity price movements with amplified exposure—both on the upside and downside.

A leveraged commodity ETF operates by seeking to deliver multiples (typically 2x or -2x) of an underlying commodity index’s daily returns. For example, if an index rises 1% in a single trading session, a 2x leveraged fund aims to gain 2%, while a -2x inverse leveraged commodity ETF would decline by 2%. These structures carry significant expense ratios and reset risk, meaning returns compound daily and can diverge from expected outcomes over longer periods.

Five Most-Watched Leveraged Commodity ETF Vehicles in 2022

Throughout 2022, five leveraged commodity ETF products generated notable net inflows, reflecting market demand during commodity volatility:

ProShares UltraShort BLOOMBERG CRUDE OIL (SCO) captured approximately $398 million in net inflows during the period. This leveraged commodity ETF seeks to deliver -2x daily returns relative to the Bloomberg Commodity Balanced WTI Crude Oil Index, making it attractive to traders anticipating crude price declines. The fund maintains a 0.95% expense ratio and trades on NYSE Arca. SCO gained particular traction as WTI futures hit their highest levels since 2009, prompting bearish traders to position for reversals.

Horizons BetaPro Natural Gas -2x Daily Bear ETF (HND) recorded approximately $96 million in net inflows. This inverse leveraged commodity ETF tracks natural gas price movements with -2x daily leverage, benefiting from anticipated energy price declines.

ProShares Ultra GOLD (UGL) attracted roughly $89 million in net inflows. Bullish commodity traders used this 2x leveraged commodity ETF to amplify exposure to precious metals price appreciation.

Horizons BetaPro Crude Oil Inverse Leveraged Daily Bear ETF (HOD) accumulated approximately $44 million, similarly targeting crude oil downside with inverse leverage.

ProShares Ultrashort Gold (GLL) received about $8.8 million, offering bearish positioning in the precious metals space through a leveraged commodity ETF structure.

Key Considerations for Leveraged Commodity ETF Investors

Leveraged commodity ETF products present a dual-edged opportunity—potential gains can quickly reverse into substantial losses. The daily reset mechanism means these instruments function best as short-term tactical positions rather than long-term holdings. Investors must account for the expense ratios, which can erode returns, and understand that inverse leveraged commodity ETF vehicles amplify downside when underlying commodities rally unexpectedly. The 2022 commodity market environment demonstrated both the appeal and the peril of leveraged commodity ETF investing during periods of heightened volatility and geopolitical uncertainty.