IQ Hedge Multi-Strategy Tracker ETF (QAI)
This ETF is the most popular in the category, and implements perhaps the most broad-based strategy. QAI attempts to replicate the risk-adjusted return characteristics of hedge funds using various investment strategies, including long/short equity, global macro, market neutral, and fixed income arbitrage.
QAI is structured as an “ETF of ETFs,” meaning that its underlying holdings consist of other exchange-traded funds. By combining various asset classes together in certain proportions, QAI is able to produce returns indicative of the hedge fund asset class.
iShares Diversified Alternatives Trust (ALT)
This member of the iShares product line doesn’t seek to replicate an index, striving instead to maximize absolute returns from investments with historically low correlation to traditional asset classes. ALT seeks to capitalize on relative value strategies, seeking profit by capturing spreads between assets and asset categories that deviate from fair value. Like most hedge funds, ALT establishes both long and short positions within each asset class, seeking to generate profits from “market neutral” positions. ALT’s general strategies include:
• Yield and Futures Curve Arbitrage: This strategy seeks to take advantage of interest rate and futures price differentials by entering into both long and short positions in futures on bonds, interest rates, commodities, and currencies.
• Technical Momentum/Reversal: This strategy is based on the theory that past price history may be predicative of asset value. For example, if recent performance exceeds historical performance, a long “momentum” trade opportunity may arise.
• Fundamental Relative Value: This strategy seeks to identify discrepancies between market and fundamental values of an asset, thereby profiting from an ultimate reversion between the two.
IQ ARB Merger Arbitrage ETF (MNA)
This ETF offers exposure to a strategy commonly employed by hedge funds: merger arbitrage. The index underlying MNA consists of global companies for which there has been a public announcement of a takeover by an acquirer. Once a transaction is announced, the share price of the target tends to hover below the announced price, reflecting the risk that the transaction will ultimately not be consummated. If the deal closes as planned, this strategy nets the difference between the purchase price and the price paid prior to the closing of the transaction.
There is, of course, risk associated with this strategy; if the deal falls through for any reason, the share price of the target is likely to plummet, immediately erasing most of the premium that the acquirer had been willing to pay. It’s worth noting that MNA also maintains short exposure to global equity markets as a partial equity market hedge.
IQ Hedge Macro Tracker ETF (MCRO)
This ETF seeks to replicate the risk-adjusted return of hedge funds pursuing a macro strategy. That means utilizing macro analysis (political trends, macroeconomic developments) to identify dislocations in equity, fixed income, currency, and commodity markets. Like QAI, MCRO’s underlying assets aren’t exotic securities available only to the largest and most sophisticated investors; holdings consist almost exclusively of popular ETFs, including EEM, LQD, and SHY. Again, the value added by MCRO comes from the lengthy research done to determine the combination of these asset classes that will produce hedge fund-like returns.
Credit Suisse Long/Short Liquid Index ETN (CSLS)
This product from Credit Suisse offers investors a way to access a strategy that receives one of the largest allocations in most hedge fund portfolios. This product is linked to an index that utilizes an algorithm to determine appropriate market factors and weightings across various asset classes. The Credit Suisse Long/Short Liquid Index reflects the return of a dynamic basket of liquid, investable market factors selected and weighted in accordance with that algorithm. It’s worth noting that CSLS is an exchange-traded note, meaning that investors are exposed to the credit risk of the issuer.
All 3X Leveraged ETF Short and Long Options from Direxion
Below is a listing of all the 3X ETFs currently offered by Direxion (visit this comprehensive list of all leveraged ETFs including the 2x sector funds from Proshares):
Triple Long ETFs Index Tracked Index Ticker
BGU Daily Large Cap Bull 3x Shares Russell 1000 300% RIY
MWJ Daily Mid Cap Bull 3x Shares Russell Midcap Index 300% RMC
TNA Daily Small Cap Bull 3x Shares Russell 2000 300% RTY
ERX Daily Energy Bull 3x Shares Russell 1000 Energy 300% RGUSEL
FAS Daily Financial Bull 3x Shares Russell 1000 Financial Services 300% RGUSFL
TYH Daily Technology Bull 3X Shares Russell 1000 Technology Index 300% RGUSTL
DZK Daily Developed Markets Bull 3X Shares MSCI EAFE Index 300% MXEA
EDC Daily Emerging Markets Bull 3X Shares MSCI Emerging Markets Index 300% MXEF
TYD Daily 10-Year Treasury Bull 3x Shares NYSE Arca Current 10-Year U.S. Treasury Index 300% AXTEN
TMF Daily 30-Year Treasury Bull 3x Shares NYSE Arca Current 30-Year U.S. Treasury Index 300% AXTHR
Short
BGZ Daily Large Cap Bear 3x Shares Russell 1000 -300% RIY
MWN Daily Mid Cap Bear 3x Shares Russell Midcap Index -300% RMC
TZA Daily Small Cap Bear 3x Shares Russell 2000 -300% RTY
ERY Daily Energy Bear 3x Shares Russell 1000 Energy -300% RGUSEL
FAZ Daily Financial Bear 3x Shares Russell 1000 Financial Services -300% RGUSFL
TYP Daily Technology Bear 3X Shares Russell 1000 Technology Index -300% RGUSTL
DPK Daily Developed Markets Bear 3X Shares MSCI EAFE Index -300% MXEA
EDZ Daily Emerging Markets Bear 3x Shares MSCI Emerging Markets Index -300% MXEF
TYO Daily 10-Year Treasury Bear 3x Shares NYSE Arca Current 10-Year U.S. Treasury Index -300% AXTEN
TMV Daily 30-Year Treasury Bear 3x Shares NYSE Arca Current 30-Year U.S. Treasury Index
The ProShares Short 20+ Year Treasury(TBF_) is set to track the Barclays Capital U.S. 20+ Year Treasury Bond Index, an underlying index used for successful traditional funds.
Investors may be temped to believe that a “single” inverse Treasury fund like TBF would be less risky than other types of leveraged funds. The recent shakedown in the leveraged ETF business has taught investors otherwise. TBF, like other leveraged fund strategies, is a daily tracking ETF that is appropriate for sophisticated investors.
TBF will join four other ETFs in shorting longer-term Treasuries. ProShares currently offers UltraShort 7-10 Year Treasury(PST_) and the UltraShort 20+ Year Treasury(TBT_) funds. Both PST and TBT offer 200% short exposure versus the milder 100% short exposure set to be offered by TBF.
Rival leveraged fund issuer Direxion also offers a set of short Treasury funds. The Daily 10-Year Treasury Bear 3x Shares(TYO_) and the Daily 30-Year Treasury Bear 3x Shares(TMV_) offer even greater leverage than the ProShares strategies. TYO and TMV offer investors 300% short exposure to their underlying indexes.
investors looking to profit from rising oil prices should forget about Chevron (CVX_) and ConocoPhillips (COP_), and instead look towards North Dakota.
Cramer said the Bakken shale in North Dakota produced 113 million barrels of oil last year, 67 million more barrels than it did just three years ago.
With these major oil fields just now coming on line, and the infrastructure to deliver their goods in the works, the time is right for companies like EOG Resources (EOG_), Whiting Petroleum (WLL_) and Continental Resources (CLR_).
FactorShares 2X: S&P500 Bull/TBond Bear (FSE) is a leveraged spread ETF designed for investors who believe large-cap U.S. equities will increase in value relative to long-dated U.S. Treasuries. FSE seeks to track approximately +200% of the daily return of the S&P U.S. Equity Risk Premium Total Return Index by establishing a leveraged long position in the E-mini S&P 500 Stock Price Index Futures and a leveraged short position in the U.S. Treasury Bond Futures. Additional information located in FSE overview, FSE fact sheet (pdf), and FSE disclosure (pdf).
FactorShares 2X: TBond Bull/S&P500 Bear (FSA) is a leveraged spread ETF designed for investors who believe long-dated U.S. Treasuries will increase in value relative to large-cap U.S. equities. FSA seeks to track approximately -200% of the daily return of the S&P U.S. Equity Risk Premium Total Return Index by establishing a leveraged long position in the U.S. Treasury Bond Futures and a leveraged short position in the E-mini S&P 500 Stock Price Index Futures. Additional information located in FSA overview, FSA fact sheet (pdf), and FSA disclosure (pdf).
FactorShares 2X: S&P500 Bull/USD Bear (FSU) is a leveraged spread ETF designed for investors who believe large-cap U.S. equities will increase in value relative to the international value of the U.S. Dollar. FSU seeks to track approximately +200% of the daily return of the S&P 500® Non-U.S. Dollar Index by primarily establishing a leveraged long position in the E-mini S&P 500 Stock Price Index Futures and a leveraged short position in the U.S. Dollar Index Futures. Additional information located in FSU overview, FSU fact sheet (pdf), and FSU disclosure (pdf).
FactorShares 2X: Oil Bull/S&P500 Bear (FOL) is a leveraged spread ETF designed for investors who believe crude oil will increase in value relative to large-cap U.S. equities. FOL seeks to track approximately +200% of the daily return of the S&P Crude Oil – Equity Spread Total Return Index by establishing a leveraged long position in Light Sweet Crude Oil Futures and a leveraged short position in the E-mini S&P 500 Stock Price Index Futures. Additional information located in FOL overview, FOL fact sheet (pdf), and FOL disclosure (pdf)
FactorShares 2X: Gold Bull/S&P500 Bear (FSG) is a leveraged spread ETF designed for investors who believe gold will increase in value relative to large-cap U.S. equities. FSG seeks to track approximately +200% of the daily return of the S&P Gold – Equity Spread Total Return Index by establishing a leveraged long position in Gold Futures and a leveraged short position in the E-mini S&P 500 Stock Price Index Futures. Additional information located in FSG overview, FSG fact sheet (pdf), and FSG disclosure (pdf).
Morgan Stanley has rolled out a new ETN that combines access to large cap U.S. equities with exposure to a futures-based investment in crude oil. The new S&P 500 Crude Oil Linked ETN (BARL) will offer returns of the S&P 500 Oil Hedged Index. That benchmark provides exposure to the S&P 500 Total Return Index along with positions in short-term NYMEX Crude Oil and ICE Brent Crude Oil futures contracts.
BARL is essentially a combination of the S&P 500 SPDR (SPY), United States Oil Fund (USO), and United States Brent Oil Fund (BNO), all rolled up into one. It’s important to note that BARL provides equal exposure to both stocks and commodities; a $100 investment in BARL provides both $100 worth of exposure to the S&P 500 and $50 worth of exposure to both Brent and WTI futures contracts. So if the S&P 500 gained 10% and each oil position gained 10% between rebalancing periods, BARL could be expected to add 20% (the underlying index will rebalance on a monthly basis). Conversely, if the S&P 500 dropped by 20% during the month and crude oil futures lost 20%, the value of the note would drop by 40%.
“We are pleased to provide this new ETN offering to clients,” said Nikki Tippins, Head of Equity Derivatives Sales for the Americas at Morgan Stanley. “An investment in Morgan Stanley S&P 500 Crude Oil Linked ETNs combines the returns of crude oil futures and large-cap U.S. equities in a single exchange-traded security.”
Two market veterans, Dennis Gartman and Mark Fischer, have developed the idea of using two ETN (exchange traded notes) that provide investors a method to trade the “risk on” and “risk off” type of ideas popular in today’s investing landscape. Exchange-traded Notes are senior, unsecured, unsubordinated debt securities that provide investors with exposure to the total returns of various market indices, including those linked to stocks, bonds, commodities and/or currencies. UBS Investment Bank announced that December 1 2011 is the first day of trading on the NYSE for the following two new ETRACS Exchange Traded Notes (“ETNs”) linked to the daily performance of The Fisher-Gartman Risk Index:
• ETRACS Fisher-Gartman Risk On ETN (the “Risk On ETN”) Ticker: ONN
• ETRACS Fisher-Gartman Risk Off ETN (the “Risk Off ETN”) Ticker: OFF
Investors now have the ability to implement comprehensive “risk on” and “risk off” trades through the purchase of these new exchange-traded securities, ONN and OFF.
According to the UBS press release, the Risk On ETN provides investors with the ability to implement a comprehensive “risk on” trade through the purchase of a single, exchange-traded security, ONN. The Risk On ETN provides long exposure to the daily performance of The Fisher-Gartman Risk Index. As such, investors gain exposure to an index comprised of long positions in “risk on” instruments and short positions in “risk off” instruments linked to commodities, equities, currencies and sovereign bonds. The Risk On ETN’s value is expected to rise when the outlook on markets and the broader economy is positive and to decrease when such outlook is negative.
The Risk Off ETN provides investors with the ability to implement a comprehensive “risk off” trade through the purchase of a single, exchange-traded security, OFF. Due to its daily short (inverse) exposure to the Index, the Risk Off ETN provides investors with effective long exposure to “risk off” instruments and short exposure to “risk on” instruments. The Risk Off ETN’s value is expected to rise when the outlook on markets and the broader economy is negative and to decrease when such outlook is positive.
The component weightings of each index are shown in the table below. Basically, the ONN is long the Index while the OFF is short the Index. This makes the two securities to be inverse related. If the markets are expected to rise, you want to buy ONN. Inversely, if the markets are expected to decrease, then you want to buy OFF. Investors must keep in mind that “markets” is defined as the following sectors: energy, agriculture, metals, equities, currencies and domestic and foreign government bonds. The value-based target weightings for the long and short positions are 150% and 50%, respectively, and the Index is rebalanced quarterly to return the weightings to these target levels.
The trade strategy is simply to own/buy the ONN when investors are expecting to put risk-on such as moving from cash to stocks and to own the OFF when a scare or bad news entices investors to move from stocks and currencies to safer plays such as cash. For example, when the next bad news from Europe hits the markets, investors are likely to take risk off so you would want to own OFF at this time. Comparatively, as soon as Europe proposes a final plan to save defaulting countries, the risk on trade will be where you want to be.
Long / Short ETFs
Market neutral strategies should generally exhibit very low volatilty, and have a correlation of about zero with broad equity markets. So for those looking to reduce the fluctuations of a portfolio, these funds can be useful tools [see Long/Short ETF Analysis] . There are currently a number of ETFs and ETNs that allow investors to achieve exposure to long / short strategies, each of which implements a unique approach to identifying stocks that make up the long and short positions:
ProShares RAFI Long / Short (RALS)
This ETF employs a long/short investment strategy with a twist; its underlying index is based on the RAFI methodology, and unlike the traditional market cap-weighted approach, this strategy determines allocations based on a firm’s book value, income, sales, and dividends [see Does Your Portfolio Need A RAFI ETF?]. RALS is designed with an absolute return objective, and introduces short selling to the equation in an attempt to capitalize off of discrepancies between the weightings suggested between market capitalization weighting strategies and the RAFI methodology. In essence, the fund will establish long positions in stocks for which the RAFI weighting is larger than the cap weighting and short positions in those for which the cap weighting is larger than the RAFI weighting. This ETF is rebalanced monthly and the universe of potential constituents consists of the 1,000 largest U.S. stocks by market capitalization and the 1,000 largest U.S. stocks by RAFI weight [see Under The Hood Of RALS].
Market Neutral Equity ETN (CSMN)
This fairly new fund is linked to the HS Market Neutral Index Powered by HOLT Index, a benchmark that includes equal long and short positions in stocks from a handful of different developed markets. CSMN selects potential constituents from a universe of the 275 largest North American stocks, 300 largest European stocks, and 175 largest Japanese stocks. This ETF narrows down the list to 75 long and 75 short positions using the HOLT scoring methodology, which considers whether stocks appear to be overvalued or undervalued based on stock market momentum and corporate performance factors. The underlying index is further separated into “buckets” of different sectors and regions. CSMSN distinguishes itself from other market neutral ETFs by presenting investors with a long/short strategy that is also diversified across both geographic regions as well as economic sectors [see CSMN Holdings].
Mars Hill Global Relative Value (GRV)
This actively managed ETF seeks to generate consistent positive returns in excess of the average annual return of the MSCI World Index. GRV employs a “relative value” approach, which identifies the perceived attractiveness of one investment versus another by considering expected risk, anticipated return, and liquidity. This fund combines long positions in the most attractive country, sector and industry ETFs with equal dollar amounts short in the least attractive country, sector and industry ETFs [see Using ETFs To Access Alternatives]. This “ETF of ETFs” offers an appealing market neutral approach along with the added benefits of global diversification. GRV however may turn away cost-conscious investors, seeing as how this is the most expensive fund in the Long-Short ETFdb Category, charging a steep 1.49% all-in expense ratio.
QuantShares U.S. Market Neutral Beta Fund (BTAH)
This is a fairly new offering from QuantShares, a newcomer to the ETF industry, which employs a long/short strategy based on volatility. BTAH goes long stocks with the highest betas and shorts the ones with the lowest betas–essentially generating returns equal to the spread between high volatility stocks and low volatility securities. Although this ETF is technically market neutral, its volatility-based approach makes it more appealing to bullish investors looking for downside protection, as the strategy can be expected to generally perform better when markets are climbing, and struggle when stocks fall. QuantShares also offers a Market Neutral Anti-Beta Fund (BTAL), which swaps the long and short positions.
QuantShares U.S. Market Neutral Anti-Momentum Fund (NOMO)
This QuantShares products allows for investors to bet that recent laggards in the market will outperform stocks that have recently performed well [see QuantShares Debuts Market Neutral ETFs]. NOMO achieves market neutral by establishing long positions in companies the lowest momentum scores and shorts the companies with the highest momentum scores. Momentum is defined as the total return of a security over the first twelve of the last 13 months; high momentum stocks are those with the best performance over that period while low momentum stocks are those with low total returns over that period. QuantShares also offers a Market Neutral Momentum Fund (MOM) that maintains long exposure to stocks with high momentum and short exposure to those with low momentum scores.
When China resumes the uptrend that dominated much of 2007, perhaps some of these
cities will be able to capitalize and play to their strengths. Some ETFs looking
to capture this continued growth include:
•iShares FTSE/Xinhua China 25 Index (FXI), down 28.4% year-to-date
•SPDR S&P China (GXC), down 31.9% year-to-date
•PowerShares Golden Dragon Halter USX China (PGJ), down 32.9% year-to-date
•NETS Hang Seng China Enterprises Index (SNO), down 17.4% since May 14 inception
•Claymore Alpha/China Small Cap (HAO), down 26.9% since Jan. 30 inception
The Teucrium Agricultural Fund (NYSE: TAGS) provides investors exposure to four core agricultural commodities, namely, corn, wheat, soybeans, and sugar,
The Teucrium Corn Fund (NYSE: CORN) provides investors unleveraged direct exposure to corn
The Teucrium Natural Gas Fund (NYSE: NAGS) provides investors unleveraged direct exposure to natural gas
The Teucrium WTI Crude Oil Fund (NYSE: CRUD) provides investors unleveraged direct exposure to crude oil
The Teucrium Soybean Fund (NYSE: SOYB) will provide investors unleveraged direct exposure to soybeans
The Teucrium Sugar Fund (NYSE: CANE) provides investors unleveraged direct exposure to sugar
The Teucrium Wheat Fund (NYSE: WEAT) provides investors unleveraged direct exposure to wheat
Stocks of hospital companies moved sharply higher on the decision, including HCA Holdings [HCA 28.53 1.92 (+7.22%) ], Community Health Systems [CYH 27.225 1.735 (+6.81%) ] and Tenet Healthcare [THC 5.215 0.235 (+4.72%) ].
Medicaid-related stocks such as Amerigroup [AGP 64.99 2.59 (+4.15%) ] and Molina [MOH 22.46 1.14 (+5.35%) ] also jumped.
Sector Widely Traded Hougan’s Alternative
Gold GLD IAU
Looking at the GLD [GLD 157.84 0.09 (+0.06%) ], Hougan says the IAU [IAU 15.84 0.01 (+0.06%) ] holds exactly the same thing. “It’s plenty liquid and owning it is about half the cost of the GLD.”
Sector Widely Traded Hougan’s Alternative
Financials XLF IYF
Hougan says this is something of a popularity content. “People know the XLF [XLF 14.34 0.205 (+1.45%) ].” However, the XLF only tracks large caps. (Click here to see top holdings on Yahoo! Finance.) If you want exposure to the entire banking sector Hougan recommends the IYF [IYF 54.20 0.61 (+1.14%) ] for “the full spectrum.”
Sector Widely Traded Hougan’s Alternative
Junk Bonds JNK HYG
Hougan says most investors don’t know that JNK [JNK 38.68 0.13 (+0.34%) ] is further out the junk spectrum. “The HYG [HYG 89.29 0.16 (+0.18%) ] holds slightly higher and safer securities,” he says.
Sector Widely Traded Hougan’s Alternative
Dividend Equity DVY HDV
“DVY [DVY 55.89 0.40 (+0.72%) ] was first, so everyone knows it,” explains Hougan. And the ticker is memorable. However, he explains that HDV [HDV 59.20 0.21 (+0.36%) ] focusses on higher yielding securities as well as lower volatility securities making it preferable for many retail investors.
The PowerShares DB US Inflation Exchange Traded Notes (Symbol:INFL)(the “Inflation ETNs”) and PowerShares DB US Deflation Exchange Traded Notes (Symbol: DEFL) (the “Deflation ETNs,” together with the Inflation ETNs the “ETNs”) are the first exchange-traded products to provide investors with direct exposure to US inflation or deflation expectations.
The Inflation ETNs and Deflation ETNs are based on the DBIQ Duration-Adjusted Inflation Index (the “long inflation index”) and the DBIQ Duration-Adjusted Deflation Index (the “short inflation index”, together with the long inflation index, the “inflation indexes”), respectively, which are intended to capture movements, whether up or down, in US inflation expectations or deflation expectations, as applicable.
The ETNs are senior unsecured obligations issued by Deutsche Bank AG, London Branch that are linked to the month-over-month returns, whether positive or negative, on the DBIQ Duration-Adjusted Inflation Index and the DBIQ Duration-Adjusted Deflation Index.
The inflation indices aim to track changes in the market”s expectations of future inflation implied by the difference in yields between Treasury Inflation-Protected Securities (TIPS) and U.S. Treasury bonds with approximately equivalent terms to maturity. A combination of offsetting short and long notional positions in TIPS and Treasury Bond Futures is one way in which this expectation of future inflation may be measured. If the market”s expectation of future inflation increases, TIPS are likely to outperform U.S. Treasury bonds with approximately equivalent terms to maturity. If the market”s expectation of future inflation decreases, TIPS are likely to underperform U.S. Treasury bonds with approximately equivalent terms to maturity. Therefore, to gain exposure to the market”s expectation that future inflation will increase, the Inflation ETNs take a notional long position in TIPS and a notional short position in U.S. Treasury bonds with approximately equivalent terms to maturity. To gain exposure to the market”s expectation that future inflation will decrease, the Deflation ETNs take a notional short position in TIPS and a notional long position in U.S. Treasury bonds with approximately equivalent terms to maturity.
The PowerShares DB 3x German Bund Futures Exchange Traded Notes (BUNT) and PowerShares DB German Bund Futures Exchange Traded Notes (BUNL) (collectively, the “PowerShares DB German Bund Futures ETNs,” or the “ETNs”) are the first exchange-traded products to provide investors with leveraged or unleveraged exposure to the U.S. dollar value of the returns of a German bond futures index.
The PowerShares DB German Bund Futures ETNs are based on the DB USD Bund Futures Index (the “Bund Futures Index”) which is intended to measure the performance of a long position in Euro-Bund Futures.
The ETNs are senior unsecured obligations issued by Deutsche Bank AG, London Branch that are linked to the month-over-month performance of the DB USD Bund Futures Index.
The DB USD Bund Futures Index is intended to measure the performance of a long position in Euro-Bund Futures. The underlying assets of Euro-Bund Futures are Federal Republic of Germany-government issued debt securities (“Bunds”) with a remaining term to maturity of not less than 8 years and 6 months and not more than 10 years and 6 months as of the futures contract delivery date. The returns of each ETN are obtained by combining the returns of the relevant futures index with the returns of the TBill index, less investor fees. Investors can buy and sell the ETNs on the NYSE Arca exchange or receive a cash payment at the scheduled maturity or early redemption based on the performance of the index less investor fees. The issuer has the right to redeem the ETNs at the repurchase value at any time
3x Italian Treasury Bond Futures Exchange Traded Notes (Symbol: ITLT) and the PowerShares DB Italian Treasury Bond Futures Exchange Traded Notes
(Symbol: ITLY)
3x Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBT), PowerShares DB Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBL) (collectively, the “PowerShares DB JGB Futures ETNs”) and the PowerShares DB Inverse Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBS) and PowerShares DB 3x Inverse Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBD) (collectively, the “PowerShares DB Inverse JGB Futures ETNs”, together with the PowerShares DB JGB Futures ETNs, the “ETNs”) are the first exchange-traded products to provide investors with leveraged or unleveraged exposure to the U.S. dollar value of the returns of a long Japanese sovereign bond futures index or a short Japanese sovereign bond futures index, repectively.
Here”s the data from when I recommended to my friend that he short both the Direxion Daily Gold Miners Bull 3x Shares ETF (NYSEARCA:NUGT) and the Direxion Daily Gold Miners Bear 3x Shares ETF (NYSEARCA:DUST) in the first week of October:
Small Caps: the Direxion Russell 2000 Bullish 3X ETF (NYSEARCA:TNA) and the Direxion Russell 2000 Bearish 3X ETF (NYSEARCA:TZA)
I decided to hit up the never disappointing emerging markets. Those are always good for some volatility, right? Here”s what happened with the Direxion Emerging Markets Bull 3X Shares ETF (NYSEARCA:EDC) and the Direxion Emerging Markets Bear 3X Shares ETF (NYSEARCA:EDZ):
Here”s what happened with the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (NYSEARCA:JNUG) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares ETF (NYSEARCA:JDST):
I presume (without running the numbers) that it would be especially profitable on VIX pairs like the ProShares Short VIX Short-Term Futures ETF (NYSEARCA:SVXY) and the ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA:UVXY)
IQ Hedge Multi-Strategy Tracker ETF (QAI)
This ETF is the most popular in the category, and implements perhaps the most broad-based strategy. QAI attempts to replicate the risk-adjusted return characteristics of hedge funds using various investment strategies, including long/short equity, global macro, market neutral, and fixed income arbitrage.
QAI is structured as an “ETF of ETFs,” meaning that its underlying holdings consist of other exchange-traded funds. By combining various asset classes together in certain proportions, QAI is able to produce returns indicative of the hedge fund asset class.
iShares Diversified Alternatives Trust (ALT)
This member of the iShares product line doesn’t seek to replicate an index, striving instead to maximize absolute returns from investments with historically low correlation to traditional asset classes. ALT seeks to capitalize on relative value strategies, seeking profit by capturing spreads between assets and asset categories that deviate from fair value. Like most hedge funds, ALT establishes both long and short positions within each asset class, seeking to generate profits from “market neutral” positions. ALT’s general strategies include:
• Yield and Futures Curve Arbitrage: This strategy seeks to take advantage of interest rate and futures price differentials by entering into both long and short positions in futures on bonds, interest rates, commodities, and currencies.
• Technical Momentum/Reversal: This strategy is based on the theory that past price history may be predicative of asset value. For example, if recent performance exceeds historical performance, a long “momentum” trade opportunity may arise.
• Fundamental Relative Value: This strategy seeks to identify discrepancies between market and fundamental values of an asset, thereby profiting from an ultimate reversion between the two.
IQ ARB Merger Arbitrage ETF (MNA)
This ETF offers exposure to a strategy commonly employed by hedge funds: merger arbitrage. The index underlying MNA consists of global companies for which there has been a public announcement of a takeover by an acquirer. Once a transaction is announced, the share price of the target tends to hover below the announced price, reflecting the risk that the transaction will ultimately not be consummated. If the deal closes as planned, this strategy nets the difference between the purchase price and the price paid prior to the closing of the transaction.
There is, of course, risk associated with this strategy; if the deal falls through for any reason, the share price of the target is likely to plummet, immediately erasing most of the premium that the acquirer had been willing to pay. It’s worth noting that MNA also maintains short exposure to global equity markets as a partial equity market hedge.
IQ Hedge Macro Tracker ETF (MCRO)
This ETF seeks to replicate the risk-adjusted return of hedge funds pursuing a macro strategy. That means utilizing macro analysis (political trends, macroeconomic developments) to identify dislocations in equity, fixed income, currency, and commodity markets. Like QAI, MCRO’s underlying assets aren’t exotic securities available only to the largest and most sophisticated investors; holdings consist almost exclusively of popular ETFs, including EEM, LQD, and SHY. Again, the value added by MCRO comes from the lengthy research done to determine the combination of these asset classes that will produce hedge fund-like returns.
Credit Suisse Long/Short Liquid Index ETN (CSLS)
This product from Credit Suisse offers investors a way to access a strategy that receives one of the largest allocations in most hedge fund portfolios. This product is linked to an index that utilizes an algorithm to determine appropriate market factors and weightings across various asset classes. The Credit Suisse Long/Short Liquid Index reflects the return of a dynamic basket of liquid, investable market factors selected and weighted in accordance with that algorithm. It’s worth noting that CSLS is an exchange-traded note, meaning that investors are exposed to the credit risk of the issuer.
Commodity Producers Equities ETFs
these are stocks of Commodity Producers not futures
* Market Cap is shown in millions of dollars.
GDX
Market Vectors Gold Miners ETF
$54.68 3.08% $8,109.92 9,897,830 21.96% $50.52
MOO
Market Vectors Agribusiness ET
$50.32 -0.50% $2,137.99 787,209 14.34% $43.22
IGE
iShares S&P North Amer Natural
$36.07 0.19% $1,732.91 260,484 5.33% $33.62
GDXJ
Market Vectors Junior Gold Min
$34.59 2.78% $1,549.98 1,699,300 38.11% $29.39
XME
SPDR S&P Metals & Mining
$55.26 0.24% $905.63 4,027,740 7.32% $51.10
SLX
Market Vectors Steel ETF
$63.27 0.40% $343.01 258,010 3.25% $59.61
SIL
Global X Silver Miners ETF
$19.62 1.02% $164.51 227,297 34.46% $16.11
HAP
Market Vectors RVE Hard Assets
$35.58 0.51% $132.31 33,251 6.11% $32.31
CUT
Guggenheim Timber
$20.29 -0.23% $119.42 73,450 12.69% $18.33
CRBQ
Jefferies TR/J CRB Global Comm
$45.03 0.38% $92.66 25,400 5.36% $40.97
LIT
Global X Lithium ETF
$19.84 0.71% $75.91 235,970 24.15% $17.07
WOOD
iShares S&P Global Timber & Fo
$43.49 -0.50% $64.91 13,907 9.05% $39.95
PAGG
PowerShares Global Agriculture
$30.41 -0.23% $59.16 21,172 13.46% $25.87
PSAU
PowerShares Global Gold & Prec
$44.55 3.63% $57.71 12,069 20.83% $41.01
CU
First Trust ISE Global Copper
$36.30 1.21% $36.74 21,302 20.66% $30.28
GRES
IQ Global Resources ETF
$29.11 0.79% $30.81 11,512 13.28% $27.02
COPX
Global X Copper Miners ETF
$16.34 1.22% $28.12 52,744 12.67% $13.96
PLTM
First Trust ISE Global Platinu
$30.99 1.27% $15.69 10,892 2.75% $28.78
GNR
SPDR S&P Global Natural Resour
$53.74 0.45% $10.80 13,800 7.21% $50.94
PSTL
PowerShares Global Steel
$20.98 0.52% $5.27 3,740 -5.76% $20.48
CRBA
Jefferies TR/J CRB Global Agri
$48.59 0.02% $4.86 1,356 14.19% $41.78
CRBI
Jefferies TR/J CRB Global Ind
$42.63 -0.05% $4.26 1,687 0.77% $39.17
REMX
Van Eck Mkt Vctrs Rare Mtls
$19.51 0.00% $0.00 2,192,900 0.00% $19.51
All 3X Leveraged ETF Short and Long Options from Direxion
Below is a listing of all the 3X ETFs currently offered by Direxion (visit this comprehensive list of all leveraged ETFs including the 2x sector funds from Proshares):
Triple Long ETFs Index Tracked Index Ticker
BGU Daily Large Cap Bull 3x Shares Russell 1000 300% RIY
MWJ Daily Mid Cap Bull 3x Shares Russell Midcap Index 300% RMC
TNA Daily Small Cap Bull 3x Shares Russell 2000 300% RTY
ERX Daily Energy Bull 3x Shares Russell 1000 Energy 300% RGUSEL
FAS Daily Financial Bull 3x Shares Russell 1000 Financial Services 300% RGUSFL
TYH Daily Technology Bull 3X Shares Russell 1000 Technology Index 300% RGUSTL
DZK Daily Developed Markets Bull 3X Shares MSCI EAFE Index 300% MXEA
EDC Daily Emerging Markets Bull 3X Shares MSCI Emerging Markets Index 300% MXEF
TYD Daily 10-Year Treasury Bull 3x Shares NYSE Arca Current 10-Year U.S. Treasury Index 300% AXTEN
TMF Daily 30-Year Treasury Bull 3x Shares NYSE Arca Current 30-Year U.S. Treasury Index 300% AXTHR
Short
BGZ Daily Large Cap Bear 3x Shares Russell 1000 -300% RIY
MWN Daily Mid Cap Bear 3x Shares Russell Midcap Index -300% RMC
TZA Daily Small Cap Bear 3x Shares Russell 2000 -300% RTY
ERY Daily Energy Bear 3x Shares Russell 1000 Energy -300% RGUSEL
FAZ Daily Financial Bear 3x Shares Russell 1000 Financial Services -300% RGUSFL
TYP Daily Technology Bear 3X Shares Russell 1000 Technology Index -300% RGUSTL
DPK Daily Developed Markets Bear 3X Shares MSCI EAFE Index -300% MXEA
EDZ Daily Emerging Markets Bear 3x Shares MSCI Emerging Markets Index -300% MXEF
TYO Daily 10-Year Treasury Bear 3x Shares NYSE Arca Current 10-Year U.S. Treasury Index -300% AXTEN
TMV Daily 30-Year Treasury Bear 3x Shares NYSE Arca Current 30-Year U.S. Treasury Index
The ProShares Short 20+ Year Treasury(TBF_) is set to track the Barclays Capital U.S. 20+ Year Treasury Bond Index, an underlying index used for successful traditional funds.
Investors may be temped to believe that a “single” inverse Treasury fund like TBF would be less risky than other types of leveraged funds. The recent shakedown in the leveraged ETF business has taught investors otherwise. TBF, like other leveraged fund strategies, is a daily tracking ETF that is appropriate for sophisticated investors.
TBF will join four other ETFs in shorting longer-term Treasuries. ProShares currently offers UltraShort 7-10 Year Treasury(PST_) and the UltraShort 20+ Year Treasury(TBT_) funds. Both PST and TBT offer 200% short exposure versus the milder 100% short exposure set to be offered by TBF.
Rival leveraged fund issuer Direxion also offers a set of short Treasury funds. The Daily 10-Year Treasury Bear 3x Shares(TYO_) and the Daily 30-Year Treasury Bear 3x Shares(TMV_) offer even greater leverage than the ProShares strategies. TYO and TMV offer investors 300% short exposure to their underlying indexes.
investors looking to profit from rising oil prices should forget about Chevron (CVX_) and ConocoPhillips (COP_), and instead look towards North Dakota.
Cramer said the Bakken shale in North Dakota produced 113 million barrels of oil last year, 67 million more barrels than it did just three years ago.
With these major oil fields just now coming on line, and the infrastructure to deliver their goods in the works, the time is right for companies like EOG Resources (EOG_), Whiting Petroleum (WLL_) and Continental Resources (CLR_).
The five new FactorShares ETFs:
FactorShares 2X: S&P500 Bull/TBond Bear (FSE) is a leveraged spread ETF designed for investors who believe large-cap U.S. equities will increase in value relative to long-dated U.S. Treasuries. FSE seeks to track approximately +200% of the daily return of the S&P U.S. Equity Risk Premium Total Return Index by establishing a leveraged long position in the E-mini S&P 500 Stock Price Index Futures and a leveraged short position in the U.S. Treasury Bond Futures. Additional information located in FSE overview, FSE fact sheet (pdf), and FSE disclosure (pdf).
FactorShares 2X: TBond Bull/S&P500 Bear (FSA) is a leveraged spread ETF designed for investors who believe long-dated U.S. Treasuries will increase in value relative to large-cap U.S. equities. FSA seeks to track approximately -200% of the daily return of the S&P U.S. Equity Risk Premium Total Return Index by establishing a leveraged long position in the U.S. Treasury Bond Futures and a leveraged short position in the E-mini S&P 500 Stock Price Index Futures. Additional information located in FSA overview, FSA fact sheet (pdf), and FSA disclosure (pdf).
FactorShares 2X: S&P500 Bull/USD Bear (FSU) is a leveraged spread ETF designed for investors who believe large-cap U.S. equities will increase in value relative to the international value of the U.S. Dollar. FSU seeks to track approximately +200% of the daily return of the S&P 500® Non-U.S. Dollar Index by primarily establishing a leveraged long position in the E-mini S&P 500 Stock Price Index Futures and a leveraged short position in the U.S. Dollar Index Futures. Additional information located in FSU overview, FSU fact sheet (pdf), and FSU disclosure (pdf).
FactorShares 2X: Oil Bull/S&P500 Bear (FOL) is a leveraged spread ETF designed for investors who believe crude oil will increase in value relative to large-cap U.S. equities. FOL seeks to track approximately +200% of the daily return of the S&P Crude Oil – Equity Spread Total Return Index by establishing a leveraged long position in Light Sweet Crude Oil Futures and a leveraged short position in the E-mini S&P 500 Stock Price Index Futures. Additional information located in FOL overview, FOL fact sheet (pdf), and FOL disclosure (pdf)
FactorShares 2X: Gold Bull/S&P500 Bear (FSG) is a leveraged spread ETF designed for investors who believe gold will increase in value relative to large-cap U.S. equities. FSG seeks to track approximately +200% of the daily return of the S&P Gold – Equity Spread Total Return Index by establishing a leveraged long position in Gold Futures and a leveraged short position in the E-mini S&P 500 Stock Price Index Futures. Additional information located in FSG overview, FSG fact sheet (pdf), and FSG disclosure (pdf).
Morgan Stanley has rolled out a new ETN that combines access to large cap U.S. equities with exposure to a futures-based investment in crude oil. The new S&P 500 Crude Oil Linked ETN (BARL) will offer returns of the S&P 500 Oil Hedged Index. That benchmark provides exposure to the S&P 500 Total Return Index along with positions in short-term NYMEX Crude Oil and ICE Brent Crude Oil futures contracts.
BARL is essentially a combination of the S&P 500 SPDR (SPY), United States Oil Fund (USO), and United States Brent Oil Fund (BNO), all rolled up into one. It’s important to note that BARL provides equal exposure to both stocks and commodities; a $100 investment in BARL provides both $100 worth of exposure to the S&P 500 and $50 worth of exposure to both Brent and WTI futures contracts. So if the S&P 500 gained 10% and each oil position gained 10% between rebalancing periods, BARL could be expected to add 20% (the underlying index will rebalance on a monthly basis). Conversely, if the S&P 500 dropped by 20% during the month and crude oil futures lost 20%, the value of the note would drop by 40%.
“We are pleased to provide this new ETN offering to clients,” said Nikki Tippins, Head of Equity Derivatives Sales for the Americas at Morgan Stanley. “An investment in Morgan Stanley S&P 500 Crude Oil Linked ETNs combines the returns of crude oil futures and large-cap U.S. equities in a single exchange-traded security.”
Two market veterans, Dennis Gartman and Mark Fischer, have developed the idea of using two ETN (exchange traded notes) that provide investors a method to trade the “risk on” and “risk off” type of ideas popular in today’s investing landscape. Exchange-traded Notes are senior, unsecured, unsubordinated debt securities that provide investors with exposure to the total returns of various market indices, including those linked to stocks, bonds, commodities and/or currencies. UBS Investment Bank announced that December 1 2011 is the first day of trading on the NYSE for the following two new ETRACS Exchange Traded Notes (“ETNs”) linked to the daily performance of The Fisher-Gartman Risk Index:
• ETRACS Fisher-Gartman Risk On ETN (the “Risk On ETN”) Ticker: ONN
• ETRACS Fisher-Gartman Risk Off ETN (the “Risk Off ETN”) Ticker: OFF
Investors now have the ability to implement comprehensive “risk on” and “risk off” trades through the purchase of these new exchange-traded securities, ONN and OFF.
According to the UBS press release, the Risk On ETN provides investors with the ability to implement a comprehensive “risk on” trade through the purchase of a single, exchange-traded security, ONN. The Risk On ETN provides long exposure to the daily performance of The Fisher-Gartman Risk Index. As such, investors gain exposure to an index comprised of long positions in “risk on” instruments and short positions in “risk off” instruments linked to commodities, equities, currencies and sovereign bonds. The Risk On ETN’s value is expected to rise when the outlook on markets and the broader economy is positive and to decrease when such outlook is negative.
The Risk Off ETN provides investors with the ability to implement a comprehensive “risk off” trade through the purchase of a single, exchange-traded security, OFF. Due to its daily short (inverse) exposure to the Index, the Risk Off ETN provides investors with effective long exposure to “risk off” instruments and short exposure to “risk on” instruments. The Risk Off ETN’s value is expected to rise when the outlook on markets and the broader economy is negative and to decrease when such outlook is positive.
The component weightings of each index are shown in the table below. Basically, the ONN is long the Index while the OFF is short the Index. This makes the two securities to be inverse related. If the markets are expected to rise, you want to buy ONN. Inversely, if the markets are expected to decrease, then you want to buy OFF. Investors must keep in mind that “markets” is defined as the following sectors: energy, agriculture, metals, equities, currencies and domestic and foreign government bonds. The value-based target weightings for the long and short positions are 150% and 50%, respectively, and the Index is rebalanced quarterly to return the weightings to these target levels.
The trade strategy is simply to own/buy the ONN when investors are expecting to put risk-on such as moving from cash to stocks and to own the OFF when a scare or bad news entices investors to move from stocks and currencies to safer plays such as cash. For example, when the next bad news from Europe hits the markets, investors are likely to take risk off so you would want to own OFF at this time. Comparatively, as soon as Europe proposes a final plan to save defaulting countries, the risk on trade will be where you want to be.
Long / Short ETFs
Market neutral strategies should generally exhibit very low volatilty, and have a correlation of about zero with broad equity markets. So for those looking to reduce the fluctuations of a portfolio, these funds can be useful tools [see Long/Short ETF Analysis] . There are currently a number of ETFs and ETNs that allow investors to achieve exposure to long / short strategies, each of which implements a unique approach to identifying stocks that make up the long and short positions:
ProShares RAFI Long / Short (RALS)
This ETF employs a long/short investment strategy with a twist; its underlying index is based on the RAFI methodology, and unlike the traditional market cap-weighted approach, this strategy determines allocations based on a firm’s book value, income, sales, and dividends [see Does Your Portfolio Need A RAFI ETF?]. RALS is designed with an absolute return objective, and introduces short selling to the equation in an attempt to capitalize off of discrepancies between the weightings suggested between market capitalization weighting strategies and the RAFI methodology. In essence, the fund will establish long positions in stocks for which the RAFI weighting is larger than the cap weighting and short positions in those for which the cap weighting is larger than the RAFI weighting. This ETF is rebalanced monthly and the universe of potential constituents consists of the 1,000 largest U.S. stocks by market capitalization and the 1,000 largest U.S. stocks by RAFI weight [see Under The Hood Of RALS].
Market Neutral Equity ETN (CSMN)
This fairly new fund is linked to the HS Market Neutral Index Powered by HOLT Index, a benchmark that includes equal long and short positions in stocks from a handful of different developed markets. CSMN selects potential constituents from a universe of the 275 largest North American stocks, 300 largest European stocks, and 175 largest Japanese stocks. This ETF narrows down the list to 75 long and 75 short positions using the HOLT scoring methodology, which considers whether stocks appear to be overvalued or undervalued based on stock market momentum and corporate performance factors. The underlying index is further separated into “buckets” of different sectors and regions. CSMSN distinguishes itself from other market neutral ETFs by presenting investors with a long/short strategy that is also diversified across both geographic regions as well as economic sectors [see CSMN Holdings].
Mars Hill Global Relative Value (GRV)
This actively managed ETF seeks to generate consistent positive returns in excess of the average annual return of the MSCI World Index. GRV employs a “relative value” approach, which identifies the perceived attractiveness of one investment versus another by considering expected risk, anticipated return, and liquidity. This fund combines long positions in the most attractive country, sector and industry ETFs with equal dollar amounts short in the least attractive country, sector and industry ETFs [see Using ETFs To Access Alternatives]. This “ETF of ETFs” offers an appealing market neutral approach along with the added benefits of global diversification. GRV however may turn away cost-conscious investors, seeing as how this is the most expensive fund in the Long-Short ETFdb Category, charging a steep 1.49% all-in expense ratio.
QuantShares U.S. Market Neutral Beta Fund (BTAH)
This is a fairly new offering from QuantShares, a newcomer to the ETF industry, which employs a long/short strategy based on volatility. BTAH goes long stocks with the highest betas and shorts the ones with the lowest betas–essentially generating returns equal to the spread between high volatility stocks and low volatility securities. Although this ETF is technically market neutral, its volatility-based approach makes it more appealing to bullish investors looking for downside protection, as the strategy can be expected to generally perform better when markets are climbing, and struggle when stocks fall. QuantShares also offers a Market Neutral Anti-Beta Fund (BTAL), which swaps the long and short positions.
QuantShares U.S. Market Neutral Anti-Momentum Fund (NOMO)
This QuantShares products allows for investors to bet that recent laggards in the market will outperform stocks that have recently performed well [see QuantShares Debuts Market Neutral ETFs]. NOMO achieves market neutral by establishing long positions in companies the lowest momentum scores and shorts the companies with the highest momentum scores. Momentum is defined as the total return of a security over the first twelve of the last 13 months; high momentum stocks are those with the best performance over that period while low momentum stocks are those with low total returns over that period. QuantShares also offers a Market Neutral Momentum Fund (MOM) that maintains long exposure to stocks with high momentum and short exposure to those with low momentum scores.
When China resumes the uptrend that dominated much of 2007, perhaps some of these
cities will be able to capitalize and play to their strengths. Some ETFs looking
to capture this continued growth include:
•iShares FTSE/Xinhua China 25 Index (FXI), down 28.4% year-to-date
•SPDR S&P China (GXC), down 31.9% year-to-date
•PowerShares Golden Dragon Halter USX China (PGJ), down 32.9% year-to-date
•NETS Hang Seng China Enterprises Index (SNO), down 17.4% since May 14 inception
•Claymore Alpha/China Small Cap (HAO), down 26.9% since Jan. 30 inception
The Teucrium Agricultural Fund (NYSE: TAGS) provides investors exposure to four core agricultural commodities, namely, corn, wheat, soybeans, and sugar,
The Teucrium Corn Fund (NYSE: CORN) provides investors unleveraged direct exposure to corn
The Teucrium Natural Gas Fund (NYSE: NAGS) provides investors unleveraged direct exposure to natural gas
The Teucrium WTI Crude Oil Fund (NYSE: CRUD) provides investors unleveraged direct exposure to crude oil
The Teucrium Soybean Fund (NYSE: SOYB) will provide investors unleveraged direct exposure to soybeans
The Teucrium Sugar Fund (NYSE: CANE) provides investors unleveraged direct exposure to sugar
The Teucrium Wheat Fund (NYSE: WEAT) provides investors unleveraged direct exposure to wheat
Stocks of hospital companies moved sharply higher on the decision, including HCA Holdings [HCA 28.53 1.92 (+7.22%) ], Community Health Systems [CYH 27.225 1.735 (+6.81%) ] and Tenet Healthcare [THC 5.215 0.235 (+4.72%) ].
Medicaid-related stocks such as Amerigroup [AGP 64.99 2.59 (+4.15%) ] and Molina [MOH 22.46 1.14 (+5.35%) ] also jumped.
Sector Widely Traded Hougan’s Alternative
Gold GLD IAU
Looking at the GLD [GLD 157.84 0.09 (+0.06%) ], Hougan says the IAU [IAU 15.84 0.01 (+0.06%) ] holds exactly the same thing. “It’s plenty liquid and owning it is about half the cost of the GLD.”
Sector Widely Traded Hougan’s Alternative
Financials XLF IYF
Hougan says this is something of a popularity content. “People know the XLF [XLF 14.34 0.205 (+1.45%) ].” However, the XLF only tracks large caps. (Click here to see top holdings on Yahoo! Finance.) If you want exposure to the entire banking sector Hougan recommends the IYF [IYF 54.20 0.61 (+1.14%) ] for “the full spectrum.”
Sector Widely Traded Hougan’s Alternative
Junk Bonds JNK HYG
Hougan says most investors don’t know that JNK [JNK 38.68 0.13 (+0.34%) ] is further out the junk spectrum. “The HYG [HYG 89.29 0.16 (+0.18%) ] holds slightly higher and safer securities,” he says.
Sector Widely Traded Hougan’s Alternative
Dividend Equity DVY HDV
“DVY [DVY 55.89 0.40 (+0.72%) ] was first, so everyone knows it,” explains Hougan. And the ticker is memorable. However, he explains that HDV [HDV 59.20 0.21 (+0.36%) ] focusses on higher yielding securities as well as lower volatility securities making it preferable for many retail investors.
The PowerShares DB US Inflation Exchange Traded Notes (Symbol:INFL)(the “Inflation ETNs”) and PowerShares DB US Deflation Exchange Traded Notes (Symbol: DEFL) (the “Deflation ETNs,” together with the Inflation ETNs the “ETNs”) are the first exchange-traded products to provide investors with direct exposure to US inflation or deflation expectations.
The Inflation ETNs and Deflation ETNs are based on the DBIQ Duration-Adjusted Inflation Index (the “long inflation index”) and the DBIQ Duration-Adjusted Deflation Index (the “short inflation index”, together with the long inflation index, the “inflation indexes”), respectively, which are intended to capture movements, whether up or down, in US inflation expectations or deflation expectations, as applicable.
The ETNs are senior unsecured obligations issued by Deutsche Bank AG, London Branch that are linked to the month-over-month returns, whether positive or negative, on the DBIQ Duration-Adjusted Inflation Index and the DBIQ Duration-Adjusted Deflation Index.
The inflation indices aim to track changes in the market”s expectations of future inflation implied by the difference in yields between Treasury Inflation-Protected Securities (TIPS) and U.S. Treasury bonds with approximately equivalent terms to maturity. A combination of offsetting short and long notional positions in TIPS and Treasury Bond Futures is one way in which this expectation of future inflation may be measured. If the market”s expectation of future inflation increases, TIPS are likely to outperform U.S. Treasury bonds with approximately equivalent terms to maturity. If the market”s expectation of future inflation decreases, TIPS are likely to underperform U.S. Treasury bonds with approximately equivalent terms to maturity. Therefore, to gain exposure to the market”s expectation that future inflation will increase, the Inflation ETNs take a notional long position in TIPS and a notional short position in U.S. Treasury bonds with approximately equivalent terms to maturity. To gain exposure to the market”s expectation that future inflation will decrease, the Deflation ETNs take a notional short position in TIPS and a notional long position in U.S. Treasury bonds with approximately equivalent terms to maturity.
The PowerShares DB 3x German Bund Futures Exchange Traded Notes (BUNT) and PowerShares DB German Bund Futures Exchange Traded Notes (BUNL) (collectively, the “PowerShares DB German Bund Futures ETNs,” or the “ETNs”) are the first exchange-traded products to provide investors with leveraged or unleveraged exposure to the U.S. dollar value of the returns of a German bond futures index.
The PowerShares DB German Bund Futures ETNs are based on the DB USD Bund Futures Index (the “Bund Futures Index”) which is intended to measure the performance of a long position in Euro-Bund Futures.
The ETNs are senior unsecured obligations issued by Deutsche Bank AG, London Branch that are linked to the month-over-month performance of the DB USD Bund Futures Index.
The DB USD Bund Futures Index is intended to measure the performance of a long position in Euro-Bund Futures. The underlying assets of Euro-Bund Futures are Federal Republic of Germany-government issued debt securities (“Bunds”) with a remaining term to maturity of not less than 8 years and 6 months and not more than 10 years and 6 months as of the futures contract delivery date. The returns of each ETN are obtained by combining the returns of the relevant futures index with the returns of the TBill index, less investor fees. Investors can buy and sell the ETNs on the NYSE Arca exchange or receive a cash payment at the scheduled maturity or early redemption based on the performance of the index less investor fees. The issuer has the right to redeem the ETNs at the repurchase value at any time
3x Italian Treasury Bond Futures Exchange Traded Notes (Symbol: ITLT) and the PowerShares DB Italian Treasury Bond Futures Exchange Traded Notes
(Symbol: ITLY)
3x Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBT), PowerShares DB Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBL) (collectively, the “PowerShares DB JGB Futures ETNs”) and the PowerShares DB Inverse Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBS) and PowerShares DB 3x Inverse Japanese Govt Bond Futures Exchange Traded Notes (Symbol: JGBD) (collectively, the “PowerShares DB Inverse JGB Futures ETNs”, together with the PowerShares DB JGB Futures ETNs, the “ETNs”) are the first exchange-traded products to provide investors with leveraged or unleveraged exposure to the U.S. dollar value of the returns of a long Japanese sovereign bond futures index or a short Japanese sovereign bond futures index, repectively.
Here”s the data from when I recommended to my friend that he short both the Direxion Daily Gold Miners Bull 3x Shares ETF (NYSEARCA:NUGT) and the Direxion Daily Gold Miners Bear 3x Shares ETF (NYSEARCA:DUST) in the first week of October:
Small Caps: the Direxion Russell 2000 Bullish 3X ETF (NYSEARCA:TNA) and the Direxion Russell 2000 Bearish 3X ETF (NYSEARCA:TZA)
I decided to hit up the never disappointing emerging markets. Those are always good for some volatility, right? Here”s what happened with the Direxion Emerging Markets Bull 3X Shares ETF (NYSEARCA:EDC) and the Direxion Emerging Markets Bear 3X Shares ETF (NYSEARCA:EDZ):
Here”s what happened with the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (NYSEARCA:JNUG) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares ETF (NYSEARCA:JDST):
I presume (without running the numbers) that it would be especially profitable on VIX pairs like the ProShares Short VIX Short-Term Futures ETF (NYSEARCA:SVXY) and the ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA:UVXY)