Is the UUP Right for Me?

ETFs give everyday investors access to markets and investment vehicles once reserved for high-net-worth and sophisticated investors. 

For example, you don’t need a crypto account to play bitcoin—some ETFs can achieve that. 

Nor do you need a futures account to participate in the bull market we’ve seen in the energy market. Several ETFs can give you exposure. 

You don’t need to trade options to protect your portfolio. There are ETFs that you can buy which will act as a flight-to-safety.  

One of the best flight-to-safety plays this year HASN’T been

• Real Estate
• Gold
• Bitcoin
• Bonds

While they’ve struggled with the overall stock market…the Invesco DB US Dollar Index Bullish Fund (UUP) has sizzled, gaining more than double-digit returns over the first half of 2022. 

The UUP is the most popular currency ETF amongst financial pros and retail searches month after month.

Many folks prefer the UUP because of its liquidity and ties to the U.S. dollar, the deepest Forex currency in the world.

Fed rate hikes continue to drive the dollar higher. But with such a massive rally, will the dollar continue upward bullish momentum and is still early enough to get in?

Find out our thoughts below…

Invesco DB US Dollar Index Bullish Fund (UUP)

Invesco DB US Dollar Index Bullish Fund (UUP) is designed for investors who are seeking an easy and effective way to track the value of the U.S. dollar relative to a basket of currencies consisting of the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.

UUP comprises only long USDX futures contracts, which trade on the ICE futures exchange. The USDX future contract is designed to replicate the performance of being long the U.S. dollar against the basket of currencies mentioned above.

The ETF has nearly $2 billion in assets under management. 

If you invested $10,000 in UUP 10 years ago, it would be worth nearly $13,000 today. 

Investors will sometimes call gold, bonds, or even bitcoin a flight-to-safety during market sell-offs like the one we’ve experienced in the first half of 2022. 

But the reality is that their performance has been lackluster. Meanwhile, UUP is up double-digits in percentage terms year-to-date. Reminding us all that cash is still king. 

Trading UUP

UUP trades on average 3.2 million shares per day. That means there is enough intraday volume for an active day, and swing trader. Furthermore, more sophisticated traders can take advantage of UUP of weekly, monthly, and LEAPS options.

Investing In UUP

A good rule of thumb is to avoid ETFs that charge an expense ratio higher than 1%. In the case of UUP, the expense ratio is 0.78%, which is below the cut-off line we like to see. 

And while there is a relatively cheaper ETF created by Wisdom Tree, WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU), which charges a smaller expense ratio of 0.50%, it has not performed as well as UUP has. 

While UUP doesn’t necessarily make for a good long-term investment. After all, cash is generally looked at as a defensive position. 

But it has its moments like we’re witnessing this summer. The dollar has now risen vs. the euro, as one dollar equals 0.98 euros now. 

Our Opinion  8/10

UUP has proven that it is a better flight-to-safety than gold, bitcoin, stocks, and bonds this year. 

And while the U.S. is tightening its belt when it comes to monetary policy, the rest of the world is expanding its balance sheet, which could keep UUP in a bullish uptrend. 

A good way to gain additional exposure to the ETF is to use deep in-the-money call options several months to a year out, limiting your extrinsic exposure while still offering capital efficiency.