On Thursday (11/12), we hosted here a live discussion on the topic of leveraged ETFs - scroll down to replay the entire discussion.
The panelists are three SA contributor portfolio managers who use ETFs in client portfolios and write actively on new developments in the field of exchange traded funds. Here are the panelists, their credentials and a preliminary writeup from each of them with their views on leveraged ETFs:
As a starter for our upcoming live discussion on leveraged ETFs (Thursday at 2pm ET), we asked Don a few questions regarding these products:
1) How, if at all, do you use leveraged ETFs in your own portfolios?
We use ETFs to gain very targeted exposure to indices and asset classes, not to build leverage in our portfolios. Other than using single short ETFs for selective periods of time during the crisis, we do not use them as a regular trading strategy.
As a starter for our upcoming live discussion on leveraged ETFs (Thursday at 2pm ET), we asked Dave a few questions regarding these products:
1) How, if at all, do you use leveraged ETFs in your own portfolios?
At the ETF Digest, we’ve recently launched an all leveraged ETF program for Dave’s Special Portfolio. In it we’ve broken down the current group to a dozen that are currently popular based on performance and liquidity. At the same time,...
As a starter for our upcoming live discussion on leveraged ETFs (Thursday at 2pm ET), we asked Roger a few questions regarding these products:
1) How, if at all, do you use leveraged ETFs in your own portfolios?
I have used ProShares Ultra Short S&P 500 (SDS) intermittently to hedge client portfolios. The weightings are always small -- initiating positions at 2-3% of the portfolio.
2) Do you see any significant tactical differences in the approaches of the...
The craze of exchange-traded funds (ETFs) which employ leverage (the use of borrowed capital to increase the potential return of an investment) has been on a tear over the past year.* It makes sense that speculative investors would toy around with such vehicles given the extreme market volatility we’ve been experiencing of late. Combine that with the high level of conviction certain day traders have about which direction the markets will move in and when, and you can fully appreciate why the trading volume on these ETFs...
A lot of authors on Seeking Alpha have noted that levered ETFs don’t behave as some investors intended to due to compounding effects. The levered or inverse products do what they say over a period of a single day, but not over a longer time-period. Recent examples are the post by Paul Kedrosky, where both levered bullish and bearish energy ETFs were negative simultaneously and another post by Matthew McCall, where he noted both a financials ETF and a 2x inverse financial ETF lost over the same period.
I am a skeptic on leveraged ETFs in one way. My view is that the more levered they get, the less likely they are to replicate the behavior of their index, however levered.
To get high amounts of leverage, they must rely on futures, options, swaps, and options on swaps, and the higher the amount of leverage they attempt to replicate, the greater the amount of slippage they will experience versus their multiplied index. There is also slippage from rolling futures from month to month.
Today I did a comparison of value versus growth funds using the ProShares family of ETFs. ProShares provides a selection of Ultra-long ETFs as follows:
Ultra Russell 1000 Value (UVG) Ultra Russell 1000 Growth (UKF) Ultra Russell MidCap Value (UVU) Ultra Russell MidCap Growth (UKW) Ultra Russell 2000 Value (UVT) Ultra Russell 2000...
Market participants know that the ProShares Short and UltraShort ETFs have become wildly popular. These ETFs allow investors with long-only accounts to easily bet against the market or hedge their bets. The ProShares Ultra ETFs provide either double or double the inverse of the daily returns of the asset classes they track. In the current market environment, the UltraShort ETFs have been huge winners.
For those interested, below we highlight all of the ETFs currently offered by ProShares. We also include the year-to-date performance of each...
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.
By Chip Brian SmarTrend has detected shares of ProShares Ultra Russell1000 Value (NYSE:UVG) have bullishly opened above the pivot of $24.33 today and have reached the first resistance level of $24 ...
By Chip Brian SmarTrend has detected shares of ProShares Ultra Russell1000 Value (NYSE:UVG) have bullishly opened above the pivot of $23.80 today and have reached the first resistance level of $24 ...
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