I saw a headline last week that said that Profunds had filed with the SEC for 6 new ETF's -- long and short S&P 500,Nasdaq and Dow Jones -- They are designed to have 2 times the volatility of the index. This should be great for traders -- great volatilty, will not need to trade as many shares - which means lower ticket charges and lower SEC fees -- Hopefully, it wont take long to get some good average trading volume -- first of course, the SEC needs to approve it !!!!
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2x SPY,QQQ,DIA -- Great Trading Product
- Thread starter traderjimbo
- Start date
I am sure - they will be ETF's -- and will trade just like the spy's and qqq's --- I am sure island will be the place to trade them >>>>
ProFunds Registers for Leveraged ETFs
By John Spence, Associate Editor
ProFunds has registered with the Securities & Exchange Commission (SEC) to launch several leveraged exchange-traded funds. The funds would attempt to, on a daily basis, double (200%) or double the inverse (-200%) of the S&P 500, the Nasdaq-100, the Dow Jones Industrial Average, and the S&P MidCap 400.
The Bethesda, Maryland-based fund shop offers several leveraged and sector funds that are popular with mutual fund market timers, many of whom would likely welcome the ability to make bets throughout the trading day through leveraged ETFs.
However, it is not exactly apparent yet how market makers and specialists will keep the price of a share in line with the net asset value (NAV) of the underlying portfolio. The fact that leveraged funds use futures and options certainly adds a layer of complexity not found in existing index-linked ETFs - futures and options contracts are not eligible for in-kind redemptions.
"It appears that the derivatives portion of any creation unit transactions will be cash rather than in-kind, which makes sense," said Morningstar analyst Christopher Traulsen. "If that's the case, they might be able to arb pretty effectively."
ETFs have an arbitrage mechanism that generally prevents the price of a share from wandering too far away from the NAV.
"The question is transparency and liquidity," said Richard Ferri, a financial advisor based in Troy, Michigan. "As long as the institutional investors know how the fund is composed and what needs to be turned in to get a creation unit, or what they will get back if they turn in a unit, then I see no reason for not doing a leveraged fund. I see this as a class share to the regular open-end funds, like the Vanguard Vipers. But, rest assured, the fees will be a lot higher."
ProFunds could not comment on the issue during the "quiet period" as it awaits regulatory approval from the SEC, a process that could take years.
"Bond ETFs took one and a half years to get through the SEC - leveraged funds will take longer," said Ferri.
Morningstar's Traulsen wondered if there will be demand for leveraged ETFs given the other options currently available.
"They [will] offer precise levels of leverage, but I'm not sure that's particularly important [to retail investors]. You can already buy ETFs tracking the same or similar indexes on margin, or short them," said Traulsen.
ETF futures coming up
The SEC gave initial approval for ETF futures, which should lead to better tracking in many of the funds.
"I think ETF futures will be used to help facilitate the creation and redemption of units," said Ferri."They would also help reduce tracking error in some of the ETFs that do not have index futures trading on the indexes."
By John Spence, Associate Editor
ProFunds has registered with the Securities & Exchange Commission (SEC) to launch several leveraged exchange-traded funds. The funds would attempt to, on a daily basis, double (200%) or double the inverse (-200%) of the S&P 500, the Nasdaq-100, the Dow Jones Industrial Average, and the S&P MidCap 400.
The Bethesda, Maryland-based fund shop offers several leveraged and sector funds that are popular with mutual fund market timers, many of whom would likely welcome the ability to make bets throughout the trading day through leveraged ETFs.
However, it is not exactly apparent yet how market makers and specialists will keep the price of a share in line with the net asset value (NAV) of the underlying portfolio. The fact that leveraged funds use futures and options certainly adds a layer of complexity not found in existing index-linked ETFs - futures and options contracts are not eligible for in-kind redemptions.
"It appears that the derivatives portion of any creation unit transactions will be cash rather than in-kind, which makes sense," said Morningstar analyst Christopher Traulsen. "If that's the case, they might be able to arb pretty effectively."
ETFs have an arbitrage mechanism that generally prevents the price of a share from wandering too far away from the NAV.
"The question is transparency and liquidity," said Richard Ferri, a financial advisor based in Troy, Michigan. "As long as the institutional investors know how the fund is composed and what needs to be turned in to get a creation unit, or what they will get back if they turn in a unit, then I see no reason for not doing a leveraged fund. I see this as a class share to the regular open-end funds, like the Vanguard Vipers. But, rest assured, the fees will be a lot higher."
ProFunds could not comment on the issue during the "quiet period" as it awaits regulatory approval from the SEC, a process that could take years.
"Bond ETFs took one and a half years to get through the SEC - leveraged funds will take longer," said Ferri.
Morningstar's Traulsen wondered if there will be demand for leveraged ETFs given the other options currently available.
"They [will] offer precise levels of leverage, but I'm not sure that's particularly important [to retail investors]. You can already buy ETFs tracking the same or similar indexes on margin, or short them," said Traulsen.
ETF futures coming up
The SEC gave initial approval for ETF futures, which should lead to better tracking in many of the funds.
"I think ETF futures will be used to help facilitate the creation and redemption of units," said Ferri."They would also help reduce tracking error in some of the ETFs that do not have index futures trading on the indexes."
I wonder if the leveraged etf's will themselves be marginable ? That would effectively double your buying power. That would be 8:1 leverage for retail accounts. wow. That's even better than single stock futures at 5:1