Tag Archive | "etf"

ETF dominance in equity and options – is fixed income next?

Monday, January 21, 2013

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ETFs keep taking market share away from mutual funds, that much is well-known. In their 2012 review and 2013 outlook for the ETF industry, Deutsche Bank show how the trend away from equity mutual funds and into equity ETFs continued last year: One place where mutual funds still have control is in fixed income, and the 2012 picture was a kind of continuation of 2011: the hunt for yield saw more money pouring into both fixed income funds and…

Same trade, different reasons

Tuesday, July 31, 2012


Here’s a question we received recently from a client, asking about the relationship between the vertical spreads we trade in the ETF Trend Options strategy and the iron condors associated with our core product: I have been trading these ETF Trend Option spreads for a while now. Some of them wind up as de facto put/call condors. Can you explain the fundamental differences between your regular iron condors and these de facto ETF condors? Except for the…

This Week in VIX Scaremongering

Thursday, March 8, 2012


The halt in TVIX share issuance and the fact that, on some days, VIX-based ETF/ETN rebalancing accounts for 90% of VIX futures volume has caused some pretty wild speculation. I’ve been too busy this week to write a proper rebuttal, but here are some points that will help you steer clear of all the needless hand-wringing: The rolling of contracts in VXX and similar products is in no way “entirely game-able,” for the same reason that the term…

Combining Trend Following and Option Selling Strategies

Thursday, February 2, 2012


Historically, two of the most successful approaches to trading have been trend following and option selling. Trend following and momentum investing are strategies known to just about everybody, and option selling (i.e. collecting the volatility risk premium), while not quite as famous, is hardly a closely-held secret. Usually, these two approaches are treated as strangers. Momentum/trend traders are conceptually long volatility in that they are willing to accept small, frequent losses from choppy markets in order to reap gains…

Investors Still Haven’t Understood Leveraged ETFs

Monday, November 29, 2010

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When leveraged and inverse ETFs were first launched, many investors weren’t aware of the negative effects that daily rebalancing would have on the long-term performance of those ETFs relative to their benchmarks. Those potential problems are now more widely known, and coverage of leveraged and inverse products often includes the advice that they are best used as trading vehicles rather than investment products – i.e. to avoid investment shortfalls due to rebalancing effects, the holding period for positions using these…

The Fuss Over Natural Gas

Wednesday, September 2, 2009


People have been up in arms for months now about the troubles at the United States Natural Gas Fund, LP (NYSE: UNG), the ETF designed to track the price of natural gas. And, as far as I can tell, rightly so: the whole point of ETFs is that they were meant to be a nearly frictionless, relatively simple alternative to the clunky closed-end funds (CEF) and managed products that our parents and grandparents had to contend with. But UNG recently…

An A Priori Argument Against the Technical Analysis of Leveraged ETFs

Tuesday, February 10, 2009

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One of the trading myths we noted recently has generated some questions.  There seem to be some passionate proponents of applying technical analysis to leveraged ETF charts out there, and while that notion has already been debunked elsewhere, we thought we’d take a different approach, just for fun. Here’s an argument in favor of technical analysis based on support and resistance.  Define “support and resistance” however you wish, as long as the definition has to do with price behavior…

Is a Volatility ETF a Good Idea?

Wednesday, September 10, 2008

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Bradley Kay at Morningstar would like to see an ETF that tracks the VIX: Equities not only provide a return, but they also have a volatility that estimates how risky they look in the near future. [...] While it has historically hovered around 20, the VIX falls during quiet market periods and spikes when a flurry of trading activity buffets the stock market. An investment in this index would provide a valuable hedge against periods of heightened uncertainty, and since…

Bulls: “We’ve Made a Huge Mistake…”

Thursday, June 26, 2008


On a day like this, you really need to start off any post with some good news.  Apparently, one of the greatest television shows of our time might be made into a movie: we’re talking about Arrested Development.  So you see, there is hope for this country after all.  (Nevermind that we’re all so scared of the boogeyman that the government will be warrantlessly watching the movie over our shoulders; that’s a matter for another day.) Okay, now…

Avoid Options on Inverse Index ETFs

Wednesday, June 25, 2008


Reader S. V. raises an interesting question: I am working on scenarios to trade the contra-ultra indexes like SDS to take advantage of either a combo spread (selling puts and buying call) or another method to take advantage of price movements while reducing risk.   Any thoughts? Interesting idea.  These Ultrashort ETFs have really gained in popularity and most of them (like SDS, DXD, QID) now have enough volume to make them decent trading vehicles.  The actual stock, that is.  The…


Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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