Thursday, June 25, 2009

The Next Big Thing?

This morning ProShares launched two new triple ETFs. Now before you exclaim, “Enough already!” consider that the new ETFs are designed to track the daily moves of the S&P 500 index. As such, these are the first 3x and -3x ETFs that track the SPX directly. For this reason alone, the two new ETFs are can’t miss products. While these triple ETFs will have some interesting hedging applications, the fact that they have a target tracking period of one trading day, like the Direxion Daily ETFs, means they will probably become very hot in the day trading space. Don’t be surprised to see 100 million shares traded in both of these within a few months.

The official names of the new ETFs are the Ultra ProShares (UPRO) and Short ProShares (SPXU). For more information on these ETFs, check out their prospectus.

5 comments:

Bill Luby said...

Only a trickle of trades so far, but interest has picked up a little in the last hour.

Regarding spreads, they were 0.05-0.10 earlier in the day, down to 0.05-0.08 lately, with 0.05 becoming more common as the day wears on. (This is with UPRO trading in the mid 80s.)

Anonymous said...

Bill, VIX:VXV has been at the warning track all day. Any thoughts on that?

Bill Luby said...

Anon,

The VIX:VXV ratio closed at 0.9135 last Friday, which I took as a sell/short signal. It looks we are at about 0.9211 right now. If anything, this just confirms and reinforces what we saw at the end of last week.

FWIW, I am already net short, though the market looks strong, particularly since the Treasury auction results were announced.

Cheers,

-Bill

Erik said...

short em both!

Erik said...

short em both!

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