Doobie Keebler <kooper.db@[EMAIL PROTECTED]
> wrote in message
news:c4960e00-8bc7-4c44-b18e-0a98df1d418c@[EMAIL PROTECTED]
> On Mar 12, 5:15 pm, Winston.E....@[EMAIL PROTECTED]
wrote:
>
> > these were supposed to move in opposite directions
>
> I've noticed that intraday prices of these ETFs do not always seem to
> perfectly track changes in the underlying indexes.
> The greater the difference in volume between the long vs short ETF of
> the pair, the more noticeable that seems to be.
>
> (Could be an arbitrage op****tunity for some smart young feller not
> afraid to gather pennies in front of steamrollers.)
Uh, actually there is a designated "market maker" for these ETFs
that tries to keep them in line with the underlying (but of course first
and foremost make a profit for the market maker).
This, and all other aspects of how these funds are managed, is
covered in the description/propectus of the ETFs that can be found
at the link I'm too lazy to pull up right now, but I went over this same
issue in more detail last year.
Bottom line: you are correct that at any given time the "Ultra"
ETFs can trade at apparently incongruous prices compared to
the underlying or other ETFs. This is due to typical market
trading action, but also exagerated by the fact that the fund
itself has to manage the varying amounts of funds that come
in by executing market transactions to keep everything in line...
> Here are three charts showing the pairs of ProShares Ultra/Ultrashort
> index ETFs:
>
> QID vs QLD (NAS)
> http://tinyurl.com/28daly
>
> DDM vs DXD (DOW ultra indexes)
> http://tinyurl.com/create.php
>
> SSO vs. SDS (S&P500)
> http://tinyurl.com/2baw5r
>
> You'll notice that all charts reveal an annualized decline of between
> 5% and 10% on either side, long or short.
>
> In other words, if you buy and hold any of these you're facing a
> systemic annualized loss much greater than the management fee usually
> associated with an index fund.
I think their claimed fee is about 0.92%, but don't quote me on
that...look up the actual fund description...
> Here's DIG vs. DUG (oil)
> http://tinyurl.com/2qrrv6
>
> And here's a new one: FXI vs. FXP (Xinhua)
> http://tinyurl.com/2mw6be
>
> (disclaimer: I do swing trade these occasionally. Do your own DD.
> These are highly speculative. )
>
> Now, I'd like to believe that these 'ultra' ETFs are exemplars of high
> tech stock trading wizardry, flawless program trading software running
> on the finest hardware with the smartest street geeks the world has
> ever known sprinkling the finest purple pixel fairy dust upon the
> server farm.
Uh no, just the usual suspects doing the usual thang...
> But for all I know these ETFs might could be held
> together with not much more than motherspit, some duct tape, and a
> yard or two of binder-twinder. Hard to say how they'd handle a really
> tough trading day with brokers jumping out of high windows and
> whatnot. Might come apart at the seams and move in any weird
> direction, off track, up is down and down is down. Who can say for
> sure?
Once you know what their motivations are (which are the same
motivations as all sell-siders), and you know what their positions
and projected liabilities are, you can kind of predict when they
will break down and display incongruities...
In other words, you've got the same basic problem with every
financial "product" out there...
> There's investing, theres 's speculating. And then there's gambling.
>
> Just do your own DD and make sure you know which it is you're getting
> yoursefl into.
>
> Unlike BuffetHater, you should probably do that BEFORE you put your
> money at risk (lulz!)
What makes you think he's ever invested in anything?
---
William Ernest Reid
Post count: 964
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