Top

Published in:

2016 | OriginalPaper | Chapter

14. Other ETF Investment Strategies and Applications

Author : A. Seddik Meziani

Published in: Exchange-Traded Funds

Publisher: Palgrave Macmillan UK

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

This chapter highlights three exchange-traded fund (ETF) trading strategies: one based on futures, where an individual enters a contract to buy or sell ETFs at a specified price and delivery date; another on margin trading, in exchange for making a small payment known as the “initial margin;” and the third on what’s commonly known as “barbelling,” an investment strategy best described as a balancing act between investments deemed safe and those considered a greater risk.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

previous chapter The Long and Short of ETFs

next chapter Investment Strategies Using Options on ETFs

It is currently known as the PowerShares QQQ ETF (QQQ), although it still tracks the NASDAQ-100 Index and has been managed by Invesco since March 21, 2007.

The CME and the Chicago Board of Trade merged in July 2007 to become the CME Group Inc.

Trading is conducted from Sunday evening through Friday afternoon based on information provided 24 hours a day by a data center operated by the CME Group.

Traditionally, commodity futures are settled with physical delivery on expiration, while securities futures use cash settlements or physical delivery of ETF shares.

These accounts are “segregated” in accordance with Section 4d(a)(2) of the Commodity Exchange Act and Securities and Exchange Commission Rule 1.20.

Securities futures are jointly regulated by the Commodity Futures Trading Commission and the Securities and Exchange Commission, whereas physical ETFs are exclusively regulated by the Securities and Exchange Commission (SEC).

On Monday, August 24, 2015, a computer outage at Bank of New York Mellon Corp. (BNY), unrelated to the market turbulence of the time, forced fund sponsors to sort out pricing data manually to provide investors with the values of their holdings. The computer glitch caused significant mispricings of 1% or more, hindering investors’ ability to trade in and out of ETFs and other popular funds. Considering that BNY is the largest fund custodian in the world by assets, the pricing snag affected several big money managers and fund companies.

These could be any other liquid ETF futures contracts.

http://www.online-futures-trading.co.uk/futures/index-futures/eurostoxx-50-fesx (as of August 30, 2015).

Options contracts are the second vehicle.

See Harrod, R.F., The Life Of John Maynard Keynes, New York: Harcourt Brace, 1951.

Fama, E.F., and K.R. French, “Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage,” Journal of Business, 60(1) (January 1987), pp. 55–73.

Deaton, A., and G. Laroque, “On the Behaviour of Commodity Prices,” Review of Economic Studies, 59(1) (January 1992), pp. 1–23.

Erb, C.B., and C.R. Harvey, “The Tactical and Strategic Value of Commodity Futures.” Financial Analysts Journal, 62(2) (March/April 2006), pp. 69–97.

Tang, K., and W. Xiong, “Index Investment and the Financialization of Commodities,” Financial Analysts Journal, 68(6) (November/December 2012), pp. 54–74.

http://us.spindices.com/documents/research/commodity-investments-missing-piece-of-portfolio-puzzle-201209.pdf

In the case of bond ETFs, financial leverage allows a greater par value.

https://www.optionshouse.com/margins-buying-power/margin-requirements/long-etfs/

http://www.bankrate.com/rates/interest-rates/call-money.aspx

This suggests that the broker has discretion in making a margin call. A purist will rightly argue that this is correct only where the broker sets margin requirements in excess of regulations, in which case there might be some discretionary room.

Contrary to a margin account, where ETF shares can be bought and sold on credit, in a cash account all transactions are made on a strictly cash basis.

www.invtrusts.co.uk

Title: Other ETF Investment Strategies and Applications
Author: A. Seddik Meziani
Publisher: Palgrave Macmillan UK
Book: Exchange-Traded Funds
Print ISBN: 978-1-137-39094-3

Electronic ISBN: 978-1-137-39095-0

Copyright Year: 2016
DOI: https://doi.org/10.1057/978-1-137-39095-0_14