The Roundhill Uranium ETF (Cboe BZX: UX) launched on January 29, 2025 as the first U.S. listed ETF designed to provide exposure to the price of physical uranium. However, unlike other commodity ETFs such as GLD, which purchases and stores physical gold, UX utilizes derivative instruments to achieve its exposure. In the case of the uranium market, derivatives may be more efficient when compared against the complications and costs associated with buying and storing the metal.
UX Portfolio Toolkit
The Roundhill Uranium ETF has several tools at its disposal to target the price of uranium, including three primary avenues for liquidity:
- Sprott Physical Uranium Trust (U-U CN)
- Yellow Cake PLC (YCA LN)
- U3O8 Swaps (OTC)
As an actively-managed ETF, UX has the ability to adjust exposures in order to meet its investment objectives. Furthermore, the Fund can tactically optimize when considering different variables, such as premiums and discounts.
Let’s explore each instrument further.
Sprott Physical Uranium Trust (U-U CN)
The Sprott Physical Uranium Trust (“Sprott”) is a closed-end fund listed on the Toronto Stock Exchange which invests and holds substantially all its assets in uranium in the form of U3O8. Sprott buys and stores uranium in licensed facilities worldwide.
The Roundhill Uranium ETF may hold a combination of shares of Sprott, or total return swaps linked to Sprott’s performance.
Note: Generally speaking, total return swaps can be an effective tool for RIC diversification purposes.
Yellow Cake PLC (YCA LN)
Yellow Cake PLC (“YCA”) is a uranium investment company listed on the London Stock Exchange. Similar to Sprott, YCA’s strategy is to buy and hold physical uranium in the form of U3O8 .
As with Sprott, the Roundhill Uranium ETF can invest directly in YCA, or use total return swaps to replicate YCA’s total returns.
U3O8 Swaps (OTC)
Unlike other commodities, the listed uranium futures market is thinly traded. This means that while CME-listed U3O8 futures are tradable on the CME, they may be suboptimal when it comes to on-screen liquidity and bid-ask spreads.
Consequently, the Roundhill Uranium ETF has the ability to trade total return swaps directly linked to the price of physical uranium. As with the Fund’s total return swaps on Sprott or YCA, any swaps linked to U3O8 are traded in the over-the-counter (OTC) market with large financial institutions.
Note: The Roundhill Uranium ETF has formed a Cayman subsidiary for the purpose of holding any derivatives (i.e. swaps) directly tied to physical uranium.
Correlation: A Closer Look
While Sprott or YCA may trade at a premium or discount to their uranium holdings, both vehicles provide liquid and transparent exposure to the price of uranium over time.
*Numerco an independent commodity supply, logistics and technology company, and their research department provides real-time Uranium prices
Per the table above, Sprott and YCA are highly correlated with the price of physical uranium, offering daily correlations of 0.991 and 0.985, respectively. You can see this phenomenon in how both Sprott and YCA have moved historically with physical uranium futures in the chart below.
Putting it All Together
As an actively-managed ETF, UX is equipped with several instruments to target exposure to physical uranium. Consider UX for your portfolio if you are looking to express a targeted view on uranium as a commodity.
Learn more: https://www.roundhillinvestments.com/etf/ux/
Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about Roundhill ETFs, please call 1-855-561-5728 or visit the website at www.roundhillinvestments.com/etf/UX. Read the prospectus or summary prospectus carefully before investing.
Uranium Market Risk. While the Fund does not invest directly in uranium, it will have significant exposure to uranium as a result of derivatives (such as swap agreements) that utilize Spot Uranium, Uranium Companies or Uranium Trusts as the reference asset. Uranium prices are highly volatile due to the interplay of supply and demand dynamics, geopolitical developments, and regulatory changes.
Swap Agreements Risk. The Fund will utilize swap agreements to derive its exposure to the price of uranium. Swap agreements may involve greater risks than direct investment in securities as they may be leveraged and are subject to credit risk, counterparty risk and valuation risk. A swap agreement could result in losses if the underlying reference or asset does not perform as anticipated. In addition, many swaps trade over-the-counter and may be considered illiquid. It may not be possible for the Fund to liquidate a swap position at an advantageous time or price, which may result in significant losses.
Regulatory and Political Risk. Uranium is a heavily regulated commodity due to its use in nuclear energy and potential for nuclear proliferation. Changes in government regulations, international treaties, or geopolitical tensions can significantly impact uranium production, distribution, and consumption.
Environmental and Operational Risk. Uranium mining and processing involve significant environmental and social challenges, including radioactive contamination, water usage, land use conflicts and waste management.
Supply Chain Risk. The uranium supply chain is geographically concentrated, with major production coming from a few countries such as Kazakhstan, Canada and Australia.
Counterparty Risk. Any swap agreements utilized by the Fund will be subject to counterparty risk between the Fund and its swap counterparties. Fund transactions involving a counterparty are subject to the risk that the counterparty will not fulfill its obligation to the Fund.
Concentration Risk. The Fund may be susceptible to an increased risk of loss, including losses due to adverse events that affect the Fund’s investments more than the market as a whole, to the extent that the Fund’s investments are concentrated in investments that provide exposure to uranium.
New Fund Risk. The Fund is a recently organized investment company with a limited operating history.
Exposure Concentration Risk. It is currently expected that the Fund will derive a significant amount of its economic exposure to uranium as a result of swap agreements that reference the Sprott Uranium Trust and Yellow Cake. As a result, the Fund’s performance will be highly dependent on the performance of the Sprott Uranium Trust and Yellow Cake. If, for whatever reason, shares of the Sprott Uranium Trust or Yellow Cake were to be delisted or lose their entire value, Fund Shares would also be expected to suffer a catastrophic loss of value. To the extent that the returns of the Sprott Uranium Trust or Yellow Cake do not match those experienced by the uranium market, the Fund’s returns will correspondingly fail to match such returns. The Fund’s strategy makes the Fund extremely susceptible to issuer-specific events relating to the Sprott Uranium Trust and Yellow Cake that may not necessarily affect the uranium market more broadly. This inherently makes an investment in the Fund riskier than an investment in a fund that provides more diversified exposure. Neither the Fund, Adviser nor Sub-Adviser have conducted due diligence upon the Sprott Uranium Trust or Yellow Cake and make no representations or warranties whatsoever regarding the Sprott Uranium Trust’s or Yellow Cake’s ability to acquire, dispose of or maintain proper custody of uranium. In the event that there is an issue regarding the Sprott Uranium Trust’s or Yellow Cake’s ability to acquire, dispose of or maintain proper custody of uranium, the Fund’s returns will be negatively impacted to a significant degree.
Non-Diversification Risk. As a "non-diversified" fund, the Fund may hold a smaller number of portfolio securities than many other funds.
Roundhill Financial Inc. serves as the investment advisor. The Fund is distributed by Foreside Fund Services, LLC, which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.
