Category Archives: oud

ETF Update: Social Media Sentiment And Millennials Get Their Own Funds

Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.). Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. There was a lot to cover from the last three weeks, so let’s dive right in. Fund launches for the week of April 18th, 2016 Guggenheim launches an ETF focused on low correlation (4/19): The Guggenheim Large Cap Optimized Diversification ETF (NYSEARCA: OPD ) is a smart beta fund designed to provide optimized diversification to the U.S. large-cap equity market. By investing in a portfolio of 100 to 120 holdings that have a lower correlation to a large-cap index the ETF hopes to deliver higher returns than a standard large-cap index. As described by William Belden, Guggenheim Managing Director and Head of ETF Business Development, in a press release, “combining differentiated return streams from lowly correlated stocks may provide the potential for attractive risk-adjusted returns.” Global X invests in Catholic values (4/19): The Global X S&P 500 Catholic Values ETF (NASDAQ: CATH ) offers investors a way to be sure their investments are considered acceptable under social responsibility standards, as designated by the United States Conference of Catholic Bishops. For further analysis on CATH, please read Religion Meets Investing In This New ETF , by Dave Dierking, and ETF Investing According To Your Religious Beliefs , by David Fabian. Sprott launches an ETF that watches social media for holdings (4/19): The Sprott BUZZ Social Media Insights ETF (NYSEARCA: BUZ ) tracks an index of U.S. stocks which rank highest in terms of bullish investor perception from insights derived from the social media collective. The “social media collective” being Twitter, Facebook, LinkedIn, YouTube, Flickr, Reddit, etc. “This ETF brings together the powerful combination of social media and big data analytics. Not only does the Index measure investor sentiment, it also identifies and ranks social media members who have historically been the most successful in their forecasting accuracy,” stated John Ciampaglia, Head of ETFs at Sprott, in a press release . For further analysis on BUZ, please read A New Social ETF With Seeking Alpha Data Used For Index Selections , by Brad Kenagy. Deutsche Asset Management expands its Comprehensive Factor ETF line up (4/19): The Deutsche X-trackers FTSE Emerging Comprehensive Factor ETF (NYSEARCA: DEMG ) targets five factors for investing in emerging market equities: value, momentum, size, volatility and quality. This is following the path laid down by the Deutsche X-trackers Russell 1000 Comprehensive Factor ETF (NYSE: DEUS ) and the Deutsche X-trackers FTSE Developed ex US Comprehensive Factor ETF (NYSE: DEEF ), which were both launched in 2014 and 2015 respectively. Amplify ETFs launches its first ETF (4/20): The newcomer is starting on a recent hot topic, online shopping. The Amplify Online Retail ETF (NASDAQ: IBUY ) targets an index of companies that generate at least 70% of their revenues from transactions in the online retail, online travel or online marketplace spaces. While the fund does cover international companies, 75% of the holdings will be weighted to domestic firms. For further analysis on IBUY, please read Amazon Is Not The Only Name In Online Retail , by Jane Edmondson. iShares launches an ETF for investing in positive global impact (4/22): The iShares Sustainable MSCI Global Impact ETF (NASDAQ: MPCT ) tracks an index of public companies whose products and services aim to address major social and environmental challenges. As stated by Jane Haines, Managing Director and Head of Equity Index Products for the Americas for MSCI, in a press release , “based on MSCI ESG Sustainable Impact Metrics , a new framework aligned with the Sustainable Development Goals (SDGS) adopted by the United Nations, the index weights securities by companies’ revenue exposure to sustainable impact themes and excludes companies that fail to meet minimum ESG standards.” Fund launches for the week of April 25th, 2016 Fund launches for the week of May 2nd, 2016 REX Shares launches 2 new VIX ETFs (5/3): The REX VolMAXX Long VIX Weekly Futures Strategy ETF (NYSEMKT: VMAX ) and the REX VolMAXX Inverse VIX Weekly Futures Strategy ETF (NYSEMKT: VMIN ) are actively managed funds that invest in near-month VIX futures. “We believe VMAX and VMIN are exactly what sophisticated investors have been asking for: exchange-traded funds that get closer to spot VIX,” said Greg King, Founder and CEO of REX Shares, in a press release . Weekly expirations for VIX futures were introduced by the CBOE in July 2015. For further analysis on VMAX and VMIN, please read Is The Holy Grail Of VIX Investing Finally Here? by Stephen Aniston. Global X targets millennial spending habits with a new fund (5/5): The Global X Millennials Thematic ETF (NASDAQ: MILN ) will track an index of stocks that have a high likelihood of benefiting from the rising spending power and unique preferences of the U.S. Millennial generation (birth years ranging from 1980-2000). Rather than focusing on a specific market category, MILN will invest across a broad range of industries that align with the spending trends of millennials. All companies included are domestic and have a market cap of at least $500 million, with an average daily turnover for the preceding six months of at least $2 million. This is the first ETF to give investors access to the spending habits of a generation, but now that the idea is out there I would be surprised if it was the last. Fund closures for the weeks of April 18th, 25th, and May 2nd 2016 Global X GF China Bond ETF ( CHNB) Horizons Korea KOSPI 200 ETF (NYSEARCA: HKOR ) Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Bespoke’s ETF Asset Class Performance Matrix – 5/6/16

Below is a look at our asset class performance matrix using key ETFs included in our daily ETF Trends (Subscription required) report. For each ETF, we include its performance in May, so far in Q2, and year to date. Equities are down across the board in May, with the worst pullbacks coming outside of the U.S. in countries like Brazil, Canada, Mexico, Spain, Russia and the U.K. In the U.S., major indices are down roughly 1% across the board, and sectors like Energy, Materials and Telecom are down 2%+. The Consumer Staples and Utilities sectors are the only ones higher so far this month. For Q2, the Nasdaq 100 (NASDAQ: QQQ ) and the Tech sector (NYSEARCA: XLK ) have been clear areas of pain, while the Energy sector is leading with a gain of 6%. Commodities are up nicely in Q2, with oil and silver leading the way. On a year-to-date basis, Brazil has posted a monstrous 33.85% gain. Gold and silver are the next best performers, with gains of 21.8% and 26.5%, respectively. The S&P 500 (NYSEARCA: SPY ) is as close to flat as it gets on the year with a gain of 26 basis points.

Exits: Know When To Hold ’em, Know When To Fold ’em

Originally published March 29, 2016 We all focus a lot of attention, perhaps too much attention, on where to buy and sell a market, on where to enter trades. Today, let’s spend some time looking at the other side: where are you getting out? Some categories are useful here, and they are not complicated. First, we have exiting at a loss, or at a profit. (This is not necessarily the same as saying exiting on a stop or at a profit, because a (trailing) stop can often be a profit-taking technique.) Both of these can then be divided into two more categories: Exiting at the initial loss or a reduced loss, and profit taking against a stop or at a limit. Let’s spend a few moments thinking about each of these. Initial stops The most important think about initial stops is that you have one. Though so many trading axioms and sayings do not apply universally, one that does is “know where you’re getting out before you get in.” For every trade, you should have a clearly defined maximum loss, and you should work hard to make sure that loss is never exceeded. In practice, bad things will happen. You will have the (hopefully rare) experience of a nasty gap beyond your stop, and sometimes will see losses that are whole number multiples of your initial trade risk. (I remember one lovely -4.5x loss in Yahoo (NASDAQ: YHOO ) years ago. Though these events are rare, they are also a good reminder of we do not, for instance, risk 10% of our accounts on a trade. A 45% loss on a single trade would be a disaster, but 4.5x a reasonable risk (1%-2%) is merely annoying.) Initial stop placement is an art in itself, but, in general, I think too much of the material on the internet probably uses stops that are too tight. I’ve never seen anyone trade successfully with stops that are a few ticks wide. For me, initial stops usually end up somewhere around 3-4 ATRs from the entry. These stops are wide enough that many traders find them uncomfortable, but simply reducing position size to manage the nominal loss is an obvious solution. Taking losses is perhaps the most important thing you will do as a trader, so do it well and do it properly. Click to enlarge Reduced stops We have defined that initial “never to be exceeded” (ideally) stop at trade entry, but many traders find it effective to move that stop rather quickly. Another possibility to consider is the time stop, in which we take steps to limit the position risk if the trade does not move in some defined time. There are many possibilities here, ranging from tightening the stop, to reducing the position, to exiting completely. I have made a good case for not reducing the position at a loss because it effectively “deleverages” your P&L in the “loss space.” (See the chart above, which is drawn from pages 242 and 243 of my book.) Personally, I’ve found that simply taking whole, but smaller than initial, losses is more effective, but your experience may be different. A key point here is that all of this – entry, exit, position size, moving stops, taking targets, re-entries, adding to positions, partial exits, etc. – all of this must work together. You change one piece, and the whole system will change. This is why some techniques may be effective in some settings but not in others. To simplify, think of reduced stops as being moved when the trade does not immediately go far enough in your favor, and consider the use of time stops. Profit targets Profit targets are usually limit orders, as opposed to stops (which, not surprisingly, are usually stop orders). In general, I find that it makes sense to have profit taking limit orders working in 24-hour markets, though we may not wish to work stops in the same after-hours environments. People sometimes make mistakes or do silly things in after-hours, and I’m always happy to provide liquidity at the right prices. There is a school of thought that says that all trades should simply be exited at profit targets, while there is a conflicting school that says we must let our winners run. How to reconcile these two approaches? I think the answer lies in trading style. For trend traders, we must let our profits run. As countertrend traders, we must take quick profits, usually at pre-defined areas. I have not found chart patterns or points to be any more effective than simply setting a target 1x my initial risk on the “other side” of the entry. Many people like to use pivots or trendlines, but I’ve executed well tens of thousands of trades (one of the advantages of spending years as short-term trader) and have simply not found these to be that effective. (For intraday traders, highs and lows of the day do deserve respect.) Consider the tradeoffs in simplifying your approach. Trailing stops Trailing stops can be managed in many ways, and I have found these to be very effective in many types of trading. We can trail at some volatility-adjusted measure, and there are even times we trail a very tight stop, effectively hoping to be taken out of the trade. This is a good problem to have: sometimes you may trail a stop at yesterday’s low, and be shocked as the trade grinds in your favor week after week – there’s nothing to be done in these cases but be forced to stay in the trade and make more money, but guard against hubris: many of the times this has happened to me; I have been properly positioned into a climax move. When these moves end, they often end dramatically, so simply ring the register and step away from the market. Putting it all together This is certainly not an exhaustive list of all the possible ways to exit trades, but it will get you started in the right direction. I find that combining these techniques, using a pre-defined target for part of the trade, trailing the stop on the rest, and moving quickly to reduce initial risk on my rather wide initial stops, this works very well for swing trading the markets I follow. Consistency certainly matters, but consistently doing something that works will, not surprisingly, lead to consistently losing money. Make sure you have a well-designed system with an edge, and that the system is one you can follow in actual trading. Make sure you trade with appropriate size and risk, and that you monitor your performance accordingly. With these guidelines, you can be a few steps closer to developing your own system and approach to trading.