Presenting The TVIX: A Double Leveraged VIX ETF
by ilene - November 22nd, 2010 12:13 pm
Courtesy of Tyler Durden: Presenting The TVIX: A Double Leveraged VIX ETF
Ever feel like this market just does not provide enough unique and suicidal ways for you to lose your hard stolen money within nanoseconds of trade execution? Never fear – here comes the TVIX, a levered third derivative bet on volatility: simply said, the TVIX will be the world’s first double leveraged VIX ETF. According to the ETF creator, VelocityShares, "the TVIX and TVIZ ETNs allow traders to manage daily trading risks using a 2x leveraged view on the S&P VIX Short-Term Futures™ Index and S&P 500 VIX Mid-Term Futures™ Index, respectively, while the XIV and ZIV ETNs enable traders to manage daily trading risks using an inverse position on the direction of the volatility indices. The indices were created by Standard & Poor’s Financial Services LLC, a division of the McGraw Hill-Companies, Inc." Then again, why not just call these what they are: a novel way (brought to you via the synthetic CDO legacy product known as ETFs) to lose money with a 99.999% guarantee. As always, we wonder why anyone would trade this product, when, with much better odds, one would at least get comped in Vegas…
Here is the full product suite about to launched by Credit Suisse.
One has to love the fine print:
The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks. They are designed to achieve their stated investment objectives on a daily basis, but their performance over longer periods of time can differ significantly from their stated daily objectives. Investors should actively and frequently monitor their investments in the ETNs. Although we intend to list the ETNs on NYSE Arca, a trading market for the ETNs may not develop.
In this case, and as in everything else related to the market, our advice is stay away from these synthetic contraptions which are merely CDOs (and now CDOs cubed) for public consumption. On the other hand, we can’t wait for someone to finally release an ETF or any other mechanism, that allows for the simple shorting of GM stock.
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DiggSector Detector: InfoTech Holds Lock on Top Ranking
by ilene - June 15th, 2010 9:29 pm
Sector Detector: InfoTech Holds Lock on Top Ranking
By Scott Martindale, Senior Managing Director, Sabrient
The stock market is searching for direction, testing support and resistance levels each week. After threatening a waterfall decline last week, it instead found support and has rallied strongly. Today, the S&P 500 and Dow Jones Industrials joined the Nasdaq 100 and Russell 2000 by rising above the important 200-day moving average. However, they all remain below their 50-day moving averages.
I like to define trends in simple terms. So, when a stock or index is above both its 50-day and 200-day moving averages, I consider it to be in a bullish trend. Likewise, when below both its 50 and 200-day, I consider it to be in a bearish trend. When it is between the two, the market is searching for direction. Recapturing the 200-day was important for fighting off what appeared to be the start of a new bear trend. It shows that there is some buyer support for this market.
Market volatility represented by the VIX has settled back to around 25, which is right at its 50-day moving average and still well above its 200-day moving average. Keep in mind that the VIX tends to move opposite the market, so finding support is typically bearish for the market. We should know soon how this is going to play out.
The SectorCast-ETF model employs a fundamentals-based multi-factor approach including forward valuation, earnings growth prospects, recent analyst consensus sentiment, and various return ratios. Like the technical picture, current quant rankings reflect an uncertain outlook.
Latest rankings: Information Technology (IYW) continues its lock on the top ranking with a score of 71, but this Financials (XLF) has taken back the second spot after falling into a tie last week with Healthcare (XLV). Overall, sector scores are quite similar to last week despite the big market rally from the edge of the abyss.
Notably, Consumer Discretionary (XLY) and Materials (XLB) have both weakened somewhat this week. Also worth mentioning is that Energy (XLE) and Materials (XLB) were the only sectors to get hit with more analysts reducing earnings estimates rather than increasing.
IYW fares the best in the percentage of analysts increasing earnings estimates, and it ranks high in return on…
Gold Chart (GLD)
by Chart School - April 30th, 2010 11:35 am
GLD
Courtesy of Allan
I wrote to my subscribers last night about GLD; that it is on a fresh Buy on the Daily chart and is in Buy Pending mode on the Weekly chart. That longer-term Weekly Buy should be confirmed by today’s close. Below is a GLD 240 minute chart:
The most recent Buy on the chart came on April 20th at 111.93. With GLD up above 115 today, that is about a 3% rise from inception of the trade. Taking a look at the option tables, a 3% rise in near-term at the money calls translates into a pro-forma rise in the option of well over 100%, i.e. from about $2.07 to between $4.00 and $4.85:
That’s a healthy return for a ten-day period. But it has to be, as the trade has to make up for the previous whipsaw, where I suspect a loss on the option would be about 30%. Adding it all up, assuming that for any given two trades there is a 30% loss followed by a 100% gain, at the end of the year you are addicted to the trend models.
A lot of assumptions here, including pro-forma and/or hypothetical analysis. But the underlying trading paradigm is not assumed, it is real and based on this rear-view mirror option analysis, is a viable strategy going forward. Daily and Weekly models offer similar opportunity and I’ll eventually get around to posting this same kind of analysis for those time frames.
Allan’s newly launched newsletter, “Trend Following Trading Model,” goes with the trend-following trading system he’s been working on for years. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction, read this introductory article. – Ilene
E! True Hollywood Story: The Rise and Fall of SKF
by ilene - August 10th, 2009 10:16 am
E! True Hollywood Story: The Rise and Fall of SKF
Courtesy of Damien Hoffman at Wall St. Cheat Sheet
This is a guest post by Joshua Brown at The Reformed Broker.
The ProShares Ultra Short Financial ETF, otherwise called SKF, has had one of the most spectacular flame-outs in market history. One minute, SKF was a superstar, raking in millions of dollars on a daily basis and dominating the most actives list. Then suddenly, the party was over.This is the E! True Hollywood Story of SKF, Star of the Credit Crisis.February 2007Baby SKF is born on a wintry day at the ProShares HQ in Bethesda, MD. Just like his inverse twin, UYG, SKF was born at $70 per share on the American Stock Exchange.
SKF: I started shorting banks like, immediately. In fact, I was ultra shorting them, predominantly through the use of swaps contracts as opposed to outright short sales. Bank of America, Citi, Goldman…you name ‘em, I was short ‘em.
July 2007SKF was in the right place at the right time from day one. In the midst of an overheating stock market, Bear Stearns came out in the middle of July with the admission that two of it’s internal sub prime hedge funds were in trouble.
SKF: This was my first big break. Even though I wasn’t short a lot of Bear stock, I knew I was onto something big. Every morning, my agents would email me clippings of mortgage-backed securities stories from the media. The rest of the bank and broker stocks started getting jittery and I was getting hooked on the volatility, big time!
February 2008SKF celebrated it’s first birthday amidst a Dow Jones that had already lost 2000 points from it’s peak. SKF was flirting with $100 per share and the momentum traders had just started showing up at it’s party.
SKF: The scene was intense, man. The StockTwits guys started tweeting about me like crazy and I was all they could talk about on the Yahoo Finance message boards. People all over the market started to hear my name. I ain’t gonna lie, it felt good. Felt like I was important. So what that Bear Stearns was about to be shuttered and that the foreclosures were starting to get rolling. I was gonna be famous!
September 2008The drizzle of financial distress has now become a tsunami as Lehman…
USO Oil Fund – All of the Drops, Only Some of the Gains
by Phil - June 6th, 2009 7:57 am
USO Oil Fund – All of the Drops, Only Some of the Gains
For the past two weeks we’ve been shorting USO on and off and it’s been very entertaining.
We all know that most ETFs are a total scam as they use a system called "creation units" to deliver shares to market WITHOUT changing the net asset value of the underlying assets of the fund. Because the funds are front-loaded (or front-unloaded) with cash during the day, professional arbitrators have a field day buying or shorting the underlying stocks or commodities that the ETFs MUST buy to "square up" their positions at the end of a day. Effectively, ETFs allow professional investors to pool the money of small investors into one, easy-to-manipulate target that follows pre-defined rules they can trade against.
In the case of USO, which has always underperformed oil by a wide margin, the divergence is so bad and the flaws in the fund are so vulnerable to attack by the already manipulative NYMEX crowd, that oil expert Stephen Schork has labeled it a pyramid scheme:
So how is this like a pyramid scheme? A pyramid scheme is funded by a constant flow of dollars into the venture by new investors. The second investor knowingly and willingly pays the first investor on the assumption he will get paid by the third investor… and so on. It’s similar to a Ponzi/Madoff scheme, with the key difference, investors don’t know (or don’t want to know as long as those alleged returns keep rolling in) they are being scammed.
The USO is being funded by a proliferation of new retail investors looking to diversify into “alternative investments” (which as far as we have been able to ascertain, alternative investment is a euphemism for Las Vegas style bets on commodities by retail investors tired of watching their 401Ks drop). More importantly, these investors are obviously out of their league, i.e. taking buy-and-hold positions in a contango which raises their cost basis every month they roll into the higher priced deferred contract.
We assume they are buying the USO because they are bullish. But in a peculiar way, their actions could be helping to prevent the market from rallying. These new investors are not funding a pyramid per se, but they are helping to fund storage. That is to say, with global demand in the doldrums, the contango will persist. And, as long as it lasts,
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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