Oil is a popular investment target these days as the price of oil shows a lot of volatility, and provides some diversification as it doesn’t move in concert with the overall market. As an alternative to investing in oil stocks or trading crude oil directly, you may wish to invest directly in ETF’s that track an oil index.

There are several ways that you can invest in an oil etf. Here’s a list of a few choices, along with a few pros and cons.

The first way to invest in Oil is to buy and ETF that simply attempts to track the price of oil. Typically this is done not by the fund buying oil directly, but buy taking positions in the oil futures contracts. These would include:

USO: United States Oil. A popular ETF, tracks West Texas intermediate crude. Uses futures contracts and options on same.

UHN: United States Heating Oil. Tracks the price of New York heating oil. Once again uses futures contracts.

USL: United States 12 Month Oil. This tracks light sweet crude that is delivered to Cushing OK, and represents the average of the next year’s delivery of crude, as priced by the furtures contracts.

OLO: PowerShares DB Crude Oil Long ETN. A Powershares ETN, it tracks a tracking index, the Deutsche Band Liquid Commodity Index.

OIL: (How did they come up with that one?) iPath S&P GSCI Crude Oil Total Return Index ETN. An iPath ETN, tracks West Texas Intermediate.

If you are really feeling bullish about oil, then you can leverage up with a double oil ETF.

DXO: The PowerShares DB Crude Oil Double Long ETN, The first of the Powerhsares ETNs attempts to track twice the daily change in the Deutsche Bank Liquid Commodity Index.

UCO: ProShares Ultra DJ-UBS Crude Oil. Tracks twice the daily change of the Dow Jones-UBS Crude Oil Sub-Index.

Of course, these days you always seem to need an ETF to play the short side of any market, and oil is no exception.

SZO: PowerShares DB Crude Oil Short ETN. Tracks at one times the inverse of the daily change of the Deutsche Bank Liquid Commodity Index.

DTO: PowerShares DB Crude Oil Double Short Exchange Traded Note. Like the above, but it tracks at twice the daily change of the Deutsche Bank Liquid Commodity Index.

Of course there are a number of ETF’s that track the performance of oil and energy indices and subindices, but that’s the subject of another article.