Tag Archives: stocks

Bono and the Other Best Celebrity Investors

Although rich celebrities have millions to their names, it can be rather tricky to maintain that wealth for a lifetime. Often, a celebrity’s stardom fades, and with it goes their money. Some celebs, however, have been effective in investing

4 Commodity Currency ETFs Outshining Dollar To Start Q4

The China-induced global economic uncertainties lashed out on the most risky asset classes to close Q3 and restrained the Fed from hiking key interest rates almost after a decade. Though the Fed attributed a wavering global financial market and a subdued inflation profile as the main cause for the deterrence of a lift-off, the sailing wasn’t smooth at home too. This was because the U.S. economy reported sub-par jobs data in September. The year-to-date monthly pace of job gains now averages 198K and the pace for the last three months was much lower at 167K. This compares with the monthly average of 260K for 2014. A weaker jobs report crushed all chances of a sooner-than-expected rate hike in the U.S., as it points toward slowing U.S. growth momentum. As a result, this latest bit of employment information stabbed the strength of the greenback which ruled the currency world for over a year and did magic for most commodities and the related ETFs to start of the fourth quarter. Dollar ETF PowerShares DB US Dollar Bullish ETF (NYSEARCA: UUP ) lost about 1.5% in the last 10 days (as of October 9, 2015) while most commodity-centric currencies turned out as surprise winners. Apart from the range-bound U.S. dollar, an oil price rebound following falling crude oil production, the commodities behemoth Glencore PLC’s ( OTCPK:GLCNF ) ( OTCPK:GLNCY ) announcement to close its supply of many actively traded commodities from zinc to copper and a slowly stabilizing Chinese market (which happens to be a foremost user of metals) boosted trading in commodities. Prior to this, commodities witnessed horrendous trading and it goes without saying that such huge and prolonged sell-offs have made the commodities’ valuation so cheap that any single driver would easily take the commodity currency ETFs to new heights. Though we believe the trend might tumble once the rising rate worries are back on the table, at the current level many investors may try to remove some of the dollar risk from their portfolio and focus on currency ETFs that are outdoing the dollar to start Q4: Below, we highlight four such currency funds that are shooting ahead of the greenback in October: WisdomTree Brazilian Real Strategy Fund (NYSEARCA: BZF ) – Up 6.1% Brazilian real was at a two-decade low at the end of September. But central bank intervention, easing political dispute over the budget, a subsiding lift-off and a commodity market bounce added to the real strength to start Q4. Since, Brazil is a commodity-centric economy, the recent surge in real is self-explanatory. Brazil’s Congress okayed most of the budget cuts, pension reforms and tax hikes planned by Rousseff’s government to contain spending and limit above-goal inflation. This fund seeks to achieve total returns reflective of both money market rates in Brazil available to foreign investors and changes in value of the Brazilian real relative to the U.S. dollar. Both AUM and average daily volume are paltry at $15.4 million and 20,000 shares, respectively. The product charges 45 bps in annual fees and is down 23.1% so far this year (as of October 9, 2015). It has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating with a High risk outlook. However, the fund added over 6.1% in the last 10 days. WisdomTree Commodity Currency Fund (NYSEARCA: CCX ) – Up 4.5% This fund provides investors exposure to the currencies and money market rates of countries commonly known as commodity exporters. It seeks to achieve total returns reflective of both money market rates in select commodity-producing countries available to foreign investors and changes to the value of these currencies relative to the U.S. dollar. With this approach, investors can embark upon a variety of economies around the world. The product invests in eight currencies – Australian Dollar, Brazilian Real, Canadian Dollar, Chilean Peso, Norwegian Krone, New Zealand Dollar, Russian Ruble, and South African Rand – almost in equal proportions. The fund is often overlooked by investors as depicted by its AUM of just $6.3 billion and average daily volume of about 1,500 shares. It charges 55 bps in annual fees. The ETF was up 4.5% over the past 10 days. WisdomTree Dreyfus Emerging Currency Fund (NYSEARCA: CEW ) – Up 4.8% Thanks to the commodity strength, even emerging market currencies took the lead. Currently, the fund has a focus on Asian currencies (42%), followed by Latin America (25%) and Europe (17%). This currency ETF also sees solid volume of about 45,000 shares a day on comparable $57.1 million in AUM. CEW charges 55 bps in fees. CEW advanced about 4.8% in the last 10 days (as of October 9, 2015). Guggenheim CurrencyShares Australian Dollar Trust ETF (NYSEARCA: FXA ) – Up 4.3% This fund offers a great play to capitalize on the future rise in the Australian dollar relative to the U.S. dollar. It tracks the movement of the Australian dollar relative to the USD, net of the Trust expenses, which are expected to be paid from the interest earned on the deposited Australian dollars. The product has amassed $180.1 million in its asset base while trades in moderate volume of 45,000 shares per day on average. It has an expense ratio of 0.40% and was up 4.3% over the past 10 days. Original post .

Exiting A Short VIX Trade

Summary A common question I receive, answered here. An update on the contango and backwardation strategy. Current advice on the VIX. Hello everyone, I hope you have had a profitable month so far. A common question I receive revolves around when to exit a short VIX trade. There really isn’t a common answer to this question but I would be happy to share what I do. Before we begin our discussion I wanted to go over a few things. I believe volatility trading can be done by all different types of investors. I personally follow a very simple method and I know there are many others here that comment with more complex strategies. In reality they all follow the very basic principles of buy low and sell high or in the case of shorting volatility short high cover low. Once you have a good understanding of the basics in volatility, I encourage you to keep increasing your knowledge by reading higher level articles and studies to further your understanding of volatility products. Many times the final piece to understanding lies in the why. Once you can accurately explain why, then you have reached mastery. I have always focused more on the how to than the why. Next summer, I am making a goal to change that and will begin focusing more on the why then the how to. I have spent a great deal of time putting together educational pieces on volatility products and you can view all of those in my Seeking Alpha library. My articles have focused on the basic principles of volatility trading. I started writing to help beginner to moderate level traders who are interested in trading volatility products. When I started trading volatility, not many resources existed for the average investor. I will continuously link back to those pieces and try to promote investor education throughout this transition. One last thing, the comment sections of my articles are always my personal favorite. Even though I don’t respond to every comment, I do read them all and am continuously impressed by what I read. Some of you write such good comments that you should look into actually writing an article or two for Seeking Alpha. Just think about it. I think you would make great contributors. Exiting the short VIX trade A reader suggested strategy for entering a short position in the VIX is posted under this article on contango and backwardation . That article looks into the entry points for shorting the VIX. However, it leaves the exit point up in the air and only causes an exit trade once futures re-enter backwardation from contango. That really isn’t the best overall exit strategy. For the basis of today’s discussion we will use the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ). Another favorite short of mine is the Proshares Ultra VIX Short-Term Futures (NYSEARCA: UVXY ). VXX invests in front and second month futures contracts. For more on how this ETN operates, click here . If you wait until futures have re-entered backwardation to exit your short position in VXX then you lose some of the profit you could have locked in at a previous date. During the bull market, we have seen extremely long periods of contango which drags VXX down over time. If you are short these shares directly then you may be racking up holding costs by not exiting after a certain period of time. If you are short VXX using options, then you might not have the same concerns. See below for an updated table of the contango and backwardation strategy for VXX. Start dare (enters contango) End date (enters backwardation) Percent Change in VXX 5/21/2012 12/28/2012 -51.56% 12/31/2013 2/25/2013 -16.43% 2/26/2013 6/20/2013 -12.50% 6/21/2013 10/07/2013 -24.72% 10/10/2013 10/15/2013 2.9% 10/16/2013 12/16/2013 -12.02% 12/18/2013 1/30/2014 6.45% 2/7/2014 3/14/2014 5.52% 3/17/2014 4/11/2014 -0.44% 4/14/2014 10/9/2014 -27.37% 10/21/2014 10/22/2014 6.79% 10/23/2014 10/27/2014 2.15% 10/28/2014 12/12/2014 11.08% 12/17/2014 1/6/2014 10.1% 1/8/2015 1/12/2015 9.48% 1/21/2015 1/28/2015 7.6% 2/3/2015 7/8/2015 -35.58% 7/10/2015 8/20/2015 -8.7% 9/16/2015 09/17/2015 7.5% 10/08/2015 volatilityetfs.blogspot.com Table created by Nathan Buehler using historical data from the Intelligent Investor Blog . What you should notice from the above table is the very poor results from 10/21/2014 on. Overall the strategy is profitable but requires very long periods of contango to be highly successful. My exit timing After the VIX has reached a peak and volatility begins to wane, I will set a profit and time target once entering a short position. I prefer not to be in a trade longer than a month. The time frame is more of a risk management tool than about profitability. Generally I set a profit target of around 25%. Now my 25% profit target will not follow the above table because it is a mixture of options and inverse volatility products such as the VelocityShares Daily Inverse VIX Short-Term ETN (NASDAQ: XIV ). To be clear on the time target, I am a worrier. You have to remember I am in a classroom all day and can’t really track what is happening in real time. The shorter I can make my profit target and get out, the happier I am. Waiting for backwardation to reappear can have two side effects. First, you are losing out on your full profit potential. Second, you are trading too often and instead of creating opportunities you are sometimes manufacturing loses. Current Advice Many investors initiated short volatility trades during the past few weeks. I encourage you to follow the above recommendations on exiting the position. Set a profit target and then close out the trade. A focus on U.S. economics should remain as any weakness will send the VIX surging again. So far, especially with jobs data, things continue to look positive. Seasonally volatility will wane after October and into the holiday season. All eyes are going to be on The Fed until liftoff. In case of a trend reversal be ready to lock in profits here. I have a small position in XIV and it has done better than I expected it to. Don’t force any trades here and never chase volatility on a fear of missing out. If you missed this one, wait it out for the next round. I highly appreciate you reading, as always!