Last summer (June 2008) I wrote a post titled "ProShares ETFs - Why trading volume makes a difference."
Since then, there have been two situations that suggest it might be a good time to look at trading volume again: ProShares has created a half dozen new ETFs that weren't in our previous analysis and market conditions have taken a further turn for the worse with the S&P 500, for example, going from roughly 1325 to under 800.
Below we present a table contrasting average daily volume in the year leading up to June 25, 2008 with average daily volume in the eight months since June 25, 2008. It is sorted in descending order based on the latest volume numbers.
The first thing that jumps out is that acceptance of these ETFs has really skyrocketed. For the more popular ETFs, average daily trading volume is up orders of magnitude higher compared to last summer.
Look who's on top of the list: Ultra Financials (UYG). Wow, people have been trading the heck out of this ETF! Its UltraShort equivalent (SKF) has only half the volume though it seems to get twice the publicity. With volume in the bullish ETF double the volume in the bearish ETF, should we assume the bottom for financial stocks has been reached?
The UltraShort QQQ (QID) was by far the ETF with the highest average daily volume in our last survey. This ETF has now dropped to fourth place and its bullish Ultra counterpart, SDS, has become popular enough to boast volume nearly as high as QID.
Some of the new ETFs have also made a big splash. The Ultra DJ-AIG Crude Oil ETF (UCO) didn't even exist last summer but is now trading over 7M shares per day. And this is despite the fact that oil is clearly not in a bull market at the moment. Interestingly, the Ultra DJ-AIG Commodities ETF (UCD), which is comprised of up to 15% of oil futures, is pretty much being neglected, trading less that 17,000 shares a day. Also in the commodities sector and a new entry since our first post, the Ultra Gold ETF (UGL) is now trading a respectable 200,000 shares per day.
I am also struck by the fact that there is so much volume for the Ultra (bullish) ETFs in the top half of our list. With so much doom and gloom hanging over the markets since last summer, I had expected to see the UltraShort (bearish) ETFs become the volume leaders. In some cases, the opposite occurred as we pointed out when discussing UYG and SKF above. In many cases, however, volume is running more or less even between the Ultra and UltraShort ETFs.
In our last post, we made a few generic points about these ETFs and the impacts of trading volume: that higher volume generally leads to narrower bid/ask spreads, higher volume often results in tracking of the underlying index more closely and that higher volume can allow fees to be spread across more shares thus reducing expenses for individual holders. All these still hold true. Back then, I suggested investors should limit themselves to the top third of the list. As volume has grown, though, it now appears that the entire top half of the list looks pretty safe to trade.
Since then, there have been two situations that suggest it might be a good time to look at trading volume again: ProShares has created a half dozen new ETFs that weren't in our previous analysis and market conditions have taken a further turn for the worse with the S&P 500, for example, going from roughly 1325 to under 800.
Below we present a table contrasting average daily volume in the year leading up to June 25, 2008 with average daily volume in the eight months since June 25, 2008. It is sorted in descending order based on the latest volume numbers.
| Symbol | Name | Avg Daily Volume prior to 6-25-08 | Avg Daily Volume since 6-25-08 |
|---|---|---|---|
| UYG | Ultra Financials | 3,778,258 | 112,176,547 |
| SSO | Ultra S&P500 | 2,368,347 | 56,212,929 |
| SDS | UltraShort S&P500 | 10,640,286 | 43,730,513 |
| QID | UltraShort QQQ | 20,042,465 | 38,670,681 |
| QLD | Ultra QQQ | 4,171,179 | 31,438,395 |
| SKF | UltraShort Financials | 3,778,876 | 30,151,740 |
| DUG | UltraShort Oil & Gas | 3,703,700 | 20,425,378 |
| DIG | Ultra Oil & Gas | 162,924 | 13,143,336 |
| DDM | Ultra Dow30 | 528,774 | 12,160,807 |
| DXD | UltraShort Dow30 | 2,454,753 | 11,606,795 |
| SRS | UltraShort Real Estate | 892,856 | 11,143,286 |
| URE | Ultra Real Estate | 81,689 | 9,003,131 |
| TWM | UltraShort Russell2000 | 4,337,620 | 7,580,650 |
| UCO | Ultra DJ-AIG Crude Oil | 7,238,102 | |
| UWM | Ultra Russell2000 | 475,894 | 4,743,293 |
| UYM | Ultra Basic Materials | 27,550 | 4,714,658 |
| SMN | UltraShort Basic Materials | 390,431 | 3,192,335 |
| FXP | UltraShort FTSE/Xinhua China 25 | 2,260,873 | 2,635,880 |
| EEV | UltraShort MSCI Emerging Markets | 563,881 | 2,516,679 |
| TBT | UltraShort Lehman 20+ Year Treasury | 156,322 | 1,953,684 |
| SH | Short S&P500 | 174,924 | 1,137,686 |
| MZZ | UltraShort MidCap400 | 451,919 | 1,064,628 |
| MVV | Ultra MidCap400 | 123,451 | 1,059,239 |
| DOG | Short Dow30 | 157,933 | 776,583 |
| USD | Ultra Semiconductors | 65,585 | 389,699 |
| PSQ | Short QQQ | 100,591 | 316,107 |
| EFU | UltraShort MSCI EAFE | 104,662 | 276,254 |
| ROM | Ultra Technology | 52,511 | 253,786 |
| UGL | Ultra Gold | 213,400 | |
| RWM | Short Russell2000 | 43,922 | 198,642 |
| SCC | UltraShort Consumer Services | 27,736 | 149,963 |
| REW | UltraShort Technology | 37,704 | 139,168 |
| SAA | Ultra SmallCap600 | 14,532 | 112,946 |
| PST | UltraShort Lehman 7-10 Year Treasury | 40,535 | 104,673 |
| SSG | UltraShort Semiconductors | 24,423 | 90,478 |
| SDD | UltraShort SmallCap600 | 60,777 | 87,470 |
| SIJ | UltraShort Industrials | 17,818 | 71,930 |
| AGQ | Ultra Silver | 69,143 | |
| UKK | Ultra Russell2000 Growth | 11,173 | 62,808 |
| RXL | Ultra Health Care | 6,507 | 54,273 |
| UVT | Ultra Russell2000 Value | 7,349 | 51,201 |
| EUM | Short MSCI Emerging Markets | 33,837 | 48,629 |
| MYY | Short MidCap400 | 64,646 | 47,522 |
| UVG | Ultra Russell1000 Value | 4,665 | 46,306 |
| SDP | UltraShort Utilities | 28,313 | 44,947 |
| SZK | UltraShort Consumer Goods | 13,972 | 43,940 |
| SKK | UltraShort Russell2000 Growth | 39,434 | 41,554 |
| UPW | Ultra Utilities | 10,043 | 41,375 |
| SJH | UltraShort Russell2000 Value | 40,356 | 40,062 |
| EFZ | Short MSCI EAFE | 12,423 | 39,222 |
| UKF | Ultra Russell1000 Growth | 17,312 | 37,990 |
| UXI | Ultra Industrials | 6,775 | 36,765 |
| UKW | Ultra Russell MidCap Growth | 6,863 | 32,999 |
| SFK | UltraShort Russell1000 Growth | 8,403 | 27,882 |
| EWV | UltraShort MSCI Japan | 24,811 | 26,478 |
| SDK | UltraShort Russell MidCap Growth | 9,104 | 24,653 |
| UVU | Ultra Russell MidCap Value | 3,433 | 21,522 |
| UCC | Ultra Consumer Services | 4,264 | 21,220 |
| SJF | UltraShort Russell1000 Value | 6,667 | 19,651 |
| UCD | Ultra DJ-AIG Commodities | 16,787 | |
| UGE | Ultra Consumer Goods | 4,853 | 15,250 |
| YCL | Ultra Yen | 14,143 | |
| SBB | Short SmallCap600 | 7,392 | 13,601 |
| ULE | Ultra Euro | 12,610 | |
| LTL | Ultra Telecommunications | 1,596 | 9,038 |
| SJL | UltraShort Russell MidCap Value | 7,639 | 7,957 |
| RXD | UltraShort Health Care | 4,822 | 6,953 |
The first thing that jumps out is that acceptance of these ETFs has really skyrocketed. For the more popular ETFs, average daily trading volume is up orders of magnitude higher compared to last summer.
Look who's on top of the list: Ultra Financials (UYG). Wow, people have been trading the heck out of this ETF! Its UltraShort equivalent (SKF) has only half the volume though it seems to get twice the publicity. With volume in the bullish ETF double the volume in the bearish ETF, should we assume the bottom for financial stocks has been reached?
The UltraShort QQQ (QID) was by far the ETF with the highest average daily volume in our last survey. This ETF has now dropped to fourth place and its bullish Ultra counterpart, SDS, has become popular enough to boast volume nearly as high as QID.
Some of the new ETFs have also made a big splash. The Ultra DJ-AIG Crude Oil ETF (UCO) didn't even exist last summer but is now trading over 7M shares per day. And this is despite the fact that oil is clearly not in a bull market at the moment. Interestingly, the Ultra DJ-AIG Commodities ETF (UCD), which is comprised of up to 15% of oil futures, is pretty much being neglected, trading less that 17,000 shares a day. Also in the commodities sector and a new entry since our first post, the Ultra Gold ETF (UGL) is now trading a respectable 200,000 shares per day.
I am also struck by the fact that there is so much volume for the Ultra (bullish) ETFs in the top half of our list. With so much doom and gloom hanging over the markets since last summer, I had expected to see the UltraShort (bearish) ETFs become the volume leaders. In some cases, the opposite occurred as we pointed out when discussing UYG and SKF above. In many cases, however, volume is running more or less even between the Ultra and UltraShort ETFs.
In our last post, we made a few generic points about these ETFs and the impacts of trading volume: that higher volume generally leads to narrower bid/ask spreads, higher volume often results in tracking of the underlying index more closely and that higher volume can allow fees to be spread across more shares thus reducing expenses for individual holders. All these still hold true. Back then, I suggested investors should limit themselves to the top third of the list. As volume has grown, though, it now appears that the entire top half of the list looks pretty safe to trade.
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