Wednesday, June 25, 2008

ProShares ETFs - why trading volume makes a difference

ProShares has a diversified lineup of ETFs that allows investors to adopt various strategies based on individual sectors, market-cap, desire to be long or short, etc.

Of the 64 ETFs currently offered, it is clear that some are more popular than others. This popularity is translated into trading volume.

Why volume matters --

The greater the volume, the smaller the bid/ask spread tends to be. Higher spreads are like a hidden fee that subtracts from investor returns. This is especially of concern to short-term traders.

On a related note, an investor might ask if this is a liquidity issue. Is it related to the liquidity of the stocks that make up the ETF? According to IndexUniverse.com, research shows that it is the liquidity of the ETF, and not the liquidity of the underlying components that really matters.

Lower volume can be associated with higher expense ratios. The heavier trading volumes associated with larger funds implies that these ETFs can spread their expenses over wider ownership bases.

The greater the volume, the closer the ETF seems to track its associated index. This effect seems to especially come into play with the ultra ETFs that are supposed to generate 200% of the change in their associated index on a daily basis. The smaller the volume, the more inconsistent the ability to achieve the 200% move. For non-leveraged ETFs, this effect can manifest itself as a divergence between the price
of the ETF and its net asset value (NAV).

Below we present a table listing all but two of the ProShares ETFs and their average daily volume (shares traded) as calculated over the last two years or the life of the fund, whichever is less.


SymbolNameAverage Daily Volume
QIDUltraShort QQQ20042421
SDSUltraShort S&P50010640286
TWMUltraShort Russell20004337620
QLDUltra QQQ4171179
SKFUltraShort Financials3778876
UYGUltra Financials3778258
DUGUltraShort Oil & Gas3703700
DXDUltraShort Dow302454753
SSOUltra S&P5002368347
FXPUltraShort FTSE/Xinhua China 252260873
SRSUltraShort Real Estate892856
EEVUltraShort MSCI Emerging Markets563881
DDMUltra Dow30528774
UWMUltra Russell2000475894
MZZUltraShort MidCap400451919
SMNUltraShort Basic Materials390431
SHShort S&P500174924
DIGUltra Oil & Gas162924
DOGShort Dow30157933
TBTUltraShort Lehman 20+ Year Treasury156322
MVVUltra MidCap400123451
EFUUltraShort MSCI EAFE104662
PSQShort QQQ100591
UREUltra Real Estate81689
USDUltra Semiconductors65585
MYYShort MidCap40064646
SDDUltraShort SmallCap60060777
ROMUltra Technology52511
RWMShort Russell200043922
PSTUltraShort Lehman 7-10 Year Treasury40535
SJHUltraShort Russell2000 Value40356
SKKUltraShort Russell2000 Growth39434
REWUltraShort Technology37704
EUMShort MSCI Emerging Markets33837
SDPUltraShort Utilities28313
SCCUltraShort Consumer Services27736
UYMUltra Basic Materials27550
EWVUltraShort MSCI Japan24811
SSGUltraShort Semiconductors24423
SIJUltraShort Industrials17818
UKFUltra Russell1000 Growth17312
SAAUltra SmallCap60014532
SZKUltraShort Consumer Goods13972
EFZShort MSCI EAFE12423
UKKUltra Russell2000 Growth11173
UPWUltra Utilities10043
SDKUltraShort Russell MidCap Growth9104
SFKUltraShort Russell1000 Growth8403
SJLUltraShort Russell MidCap Value7639
SBBShort SmallCap6007392
UVTUltra Russell2000 Value7349
UKWUltra Russell MidCap Growth6863
UXIUltra Industrials6775
SJFUltraShort Russell1000 Value6667
RXLUltra Health Care6507
UGEUltra Consumer Goods4853
RXDUltraShort Health Care4822
UVGUltra Russell1000 Value4665
UCCUltra Consumer Services4264
UVUUltra Russell MidCap Value3433
LTLUltra Telecommunications1596
TLLUltraShort Telecommunications368

ETFS missing from table: Short Financials (SEF), Short Oil & Gas (DDG).

Stick to those ETFs in the top one third of this list and you will be able to avoid the the problems inherent in the less popular ETFs.



7 comments:

www.ShareTipsInfo.com Team said...

Dear Visitors,

This blog is really nice and informative. We are pleased to know this blog is really helping people. Its our pleasure to post informative content on this useful blog created by webmaster.

Today that is 20-June-08 Inflation data has broken the records of past 13 years. Today declared Inflation was 11.05% which is too high. From last one month market is in no trade zone. Everyone is feeling pain from market response.

Just watch

The Sensex has lost more than 27% since its January peak, and trading volumes are down 46%.
Investors has lost there 70% of portfolio .

But still we say there are many undervalued stocks which can be used for investment.

To name few
1. DIGJAM
2. SBI

Most of the stocks are trading near to there 52 weeks lows. There are many fundamentally strong scripts too that are trading at lower levels. One can buy and hold them.

Nifty is expected to correct bit more and after that we can say market will be bullish. As this correction was overdue reason being if we observe in past months speculated stocks whose fundamentals are zero has also shown tremendous upward rallies in the market and now again they are trading at there real values. But still investors are trapped in them and no one is sure those scripts will ever reach those highs or not.

Stock market is a ocean where there are many pearls ( here scripts) so one need to select the best one. We strongly recommend if you are not intraday trader but investor then do go through company fundamentals and then invest.

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Regards
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Anonymous said...

Now result season is going on and results are not that positive in broader terms. More or less results are mix for Indian companies. Still Indian stock market requires one triggering point which can give clear trend in the market.

Still Nifty is in mix zone. Nifty will be bullish only if Nifty manages to trade and sustain above 3150-3200 level below these levels bears will rule the dalaal street.
Few Stocks to stay away from for short term
1. DLF
2. Satyam comp
3. Bharti Airtel
4. Tata steel
5. Rcom

Please feel free to contact us for any query.


Regards
www.ShareTipsInfo.com Team

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+91-9899056796
+91-9891890425

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Anonymous said...

I have liked using SRS over the last few weeks...

I have been using RSI (7 and 14) as an entry/exit point aid...
And a zig zag over the ETF to help with clearer buy/sell indicators...

Besides volume as a bid/ask spread "determiner" and reading the underlying DJIA or S&P, what other indicators are relevant in an ETF like SRS? Or for that matter any ETF?

I hope my question is clear.

Thanks.

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sharetipsinfo said...

Dear Visitors,

This blog is really nice and informative. We are pleased to know this blog is really helping people. It’s our pleasure to post informative content on this useful blog created by webmaster.

As budget season is approaching so it is wise to think before investing as we can witness very volatile market in coming days. Moreover, we are expecting some stock market correction in post budget session


We advise every investor to book profit before budget and try to grab value stocks at further decline for short to medium term.

For any query feel free to contact us.

Regards
SHARETIPSINFO TEAM

+91- 9891655316
+91- 9899056796
+91- 9891890425

Priya said...

I have just checked this blog and I have found it to be very useful and informative. This blog will certainly help its visitors.

Indian share market has been volatile for quite some time now. But now it has started regaining a little ground. Which has helped in rebuiding the confidence of foreign investors in the indian share market.

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stockproindiadotcom said...

What care should one take while investing?

Before making any investment, one must ensure to:

1.obtain written documents explaining the investment
2.read and understand such documents
3.verify the legitimacy of the investment
4.find out the costs and benefits associated with the investment
5.assess the risk-return profile of the investment
6.know the liquidity and safety aspects of the investment
7.ascertain if it is appropriate for your specific goals
8.compare these details with other investment opportunities available
9.examine if it fits in with other investments you are considering or you have already made
10. deal only through an authorised intermediary
11. seek all clarifications about the intermediary and the investment
12. explore the options available to you if something were to go wrong,and then, if satisfied, make the investment.
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