
Unlike mutual funds which can only be entered or exited at the market close each trading day, ETFs can be bought and sold intraday. They can be day traded just like stocks. This advantage allows investors to make speculative bets on the direction of an index while still having the ability to exit the trade at any time of the day. ETFs also allow short selling, as well as often being optionable.
One of the main benefits of trading ETFs is diversification. ETFs were created to track an index, be that a stock index, commodity index, currency index, or almost any other type of security index. The advantage of trading an index is that you are shielded from the volatile up and down swings of an individual security.
There are many funds that are highly liquid. The QQQ ETF (follows the Nasdaq-100 Index) has an average daily trade volume of over 47 million shares and over 100 other funds have an average daily volume of more than 1 million shares.
Liquidity is important to get in or out of a position quickly. There are a lot of other buyers and sellers to facilitate your trades as opposed to relying on market makers to do everything for you. If you are trading options on the funds, many of these also have highly liquid options.
As a result of high liquidity, many ETFs have low bid/ask spreads. A high bid/ask spread can cut into your trading profits. Most of the highly liquid ETFs have a bid/ask spread of only a few cents during the trading day.
In addition to sector specific, fund companies are continually introducing “Ultra” and “Inverse” ETFs. “Ultra” ETFs are leveraged funds in which the returns of the fund are double that of the index. For example, if an ETF is up 10% for a given year, then the Ultra ETF for that same index would be up 20% in the same year. Keep in mind that this leverage can work for you, as well as against you.
“Inverse” ETFs are funds which move in the opposite direction of the underlying index. So if the S&P 500 Index is down 8%, then the inverse ETF for the S&P would be up 8%. To further increase your investing options, some ultra ETFs are also inverse funds as well.
ETFs have much lower expense ratios than most mutual funds. This means that more of your money stays in the investment rather than going to the firm that is maintaining it.
Some believe Exchange Traded Funds will become the primary investment instrument for most investors largely leaving mutual funds behind. This growth is demonstrated by the increasing availability of ETF options.
The benefits of ETFs speak for themselves, that’s why we devote time to trading ETFs. The success people have had with ETFs is real, which is why I have decided to share with you all of my secrets to trading the fastest growing trading avenue!
Get $200 Off by Entering Coupon Code: ETF200APR
All The Benefits at NO COST
Among other things (see above) ETFs offer diversification like mutual funds. Unlike a mutual fund, ETFs charge only a small fee. Of course with ETF options, there is NO expense fees just the broker’s regular options commissions. |
Cash Discounts on Every Trade
Since an option controls 100 shares of an ETF at a small fraction of the cost of actual ownership, a small move in the ETF means a much bigger profit. We take it a step further and create a spread trade to provide an immediate discount on every trade. At the same time, we increase our trade success rate. |
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Moby Waller – Former CBOE Market Maker and European Options Trader, Moby Waller is co-portfolio manager of the ETF programs with BigTrends.com. Moby began trading stocks and options at 19 years old. His initial trading, options and technical analysis expertise is largely “self-taught”, although he is a National Merit Finalist and graduated from American University with a major in Political Science. Moby’s analysis and writing have been featured on BigTrends.com, Barron’s, Yahoo, SeekingAlpha, and thestreet. |