Friday, October 29, 2010

Yen hits all-time high: FXY ETF straddles

There we go, the Yen just hit a new all-time high. The Bank of Japan must be itching to do something about it.

Here are the current straddles:

Please do your own due diligence, this is not advice.

Brazil's newest giant oil discovery: options for EWZ ETF

Brazilian press is reporting that the country will announce  its largest oil discovery ever, the new Libra field, which  is expected to be even larger than Tupi. Is it expected to hold 12 billion barrels of recoverable light sweet oil, worth about $1T today. This is a conservative estimate, which assumes that only 13% of the oil can be recovered (total of 60B barrels).

Although he well is being drilled by PBR, Petrobras, PBR (click for alerts and TA), it is owned by the country.

Below are straddles for the most popular Brazilian ETF, EWZ, for November and December:

 Please do your own due diligence, this is not advice.

Thursday, October 28, 2010

OIH ETF takes a beating: straddles

The oil services ETFs is taking a beating today due to the bad HAL news, as the company is now being blamed for the BP spill, for bad cement. Wonder who is below that chain now (Cemex?).

Below are straddles for OIH.

Please do your own due diligence.

Too many ETFs in the market: Going the way of mutual funds?

Are there too many ETFs, and more importantly, too many types of ETFs on the market? Too many, as in investors need a financial advisor to guide them? is all this proliferation of ETFs being caused by banks which rely on the this business to make money?
  • Exchange-traded funds may pass US$2-trillion in worldwide assets by 2011.
  • In Canada, ETFs are only 5% of the size of Canada's domestic mutual fund market In the U.S. they make up  10% penetration. 
This article fro the Ottawa Citizen sheds some light into this..

Some believe ETFs will soon be more popular than mutual funds. But, "as they more closely resemble the older industry, ETFs are repeating the older industry's bad habits".

"Just as the number of mutual funds passed stocks on exchanges, the same is happening with ETFs, said Stuart McKinnon, CEO of Pro-Financial. Most mutual fund investors don't get the returns their funds could provide because they switch at the wrong times, he said. This will happen with ETFs, as investors chase new niche products.

"Investors will get whipsawed and there will be disastrous results." Mutual funds argue their customers get a shot at beating indexes, though most active managed funds fail to beat them. They also claim ETFs never beat the index.

Joseph Witthohn of Philadelphia- based Jannery Montgomery Scott LLC expects ETFs to pass mutual funds but warns the real enemy is other ETFs. Manufacturers are slicing investments into narrower segments -- usually with higher fees. He prefers old-fashioned broadly diversified equity ETFs.

Witthohn worries investors don't understand what they're buying. (He cited one levered ETF meant to provide twice the return of the S&P500 index. The index returned 5.5% in 2007 but the ETF returned only 1.6% rather than the expected 11%.) Equities remain the heart of both industries but ETFs have spread to exotic "alternatives" like commodities, precious metals, real estate, private equity, hedge funds and emerging markets debt.

As complexity rises, the ETF cost advantage is narrowing, especially as actively managed ETFs proliferate.
Passive equity ETFs remain the heart of the industry but Cummings says flows into bond ETFs are doubling every 15 months in Canada. There are nine fixed-income sectors here with ETFs in most of them.

Cummings sees bond ETFs coexisting with traditional bond or GIC ladders, with ETFs providing greater diversification and ease of exit. FTSE America's income director of fixed-income research, Mike Bruno, says bond ETF sales are soaring but warned investors should cut exposure to longerduration bond ETFs, which could get hurt if interest rates rise late in 2011 or in 2012.

Aver y Shenfeld, chief economist of CIBC World Markets, said investors should lighten up on safe havens and focus on solid dividend-paying stocks. Here too, ETFs provide almost too much choice. The industry has moved from its roots in market-cap weighted index funds to ones that sort by fundamentals or use equalweighting strategies like BMO's.

The ironic result is average do-it-yourself investors who were once comfortable buying and holding a few broadly based ETFs may need full-time advisers after all. Exchanges keep creating exotic new indexes and manufacturers will build products to track them as long as investors buy. According to moderator Pat Bolland, the consensus is too many ETFs are being created and too many are overly complicated.

As with mutual funds, some will merge or be closed. Two ETFs focused on individual states (Texas and Oklahoma) have closed. In the end, as speakers emphasized, mutual funds or ETFs are just tools. It's how you use them that counts".

Wednesday, October 27, 2010

New rare metals ETFs: REMX

Rare metals are in all the news lately as China threatens to cut supply. Rare earth metals are in high demand s they are used in everything from cell phones, flat screen televisions, high-performance batteries, and high-tech weapons.

Van Eck will be launching the Rare Earth/Strategic Metals ETF (ticker REMX) on Thursday, focusing exactly on materials “which make up 49 of the elements on the periodic table.”
  • MER will be 0.57%
  • follows an index created by Structured Solutions AG
  • the benchmark has 24 securities of companies primarily engaged in activities related to producing, refining and recycling of rare earth and strategic metals.
  • 24% of the weight is in Australia, 19.8% in Canada, 18.7% in the U.S., 14.84% in China, 11% in Japan

Tuesday, October 26, 2010

The Fed's QE2: straddles for IWM and GLD ETFs

The Fed is an a very tight spot now. It has pretty much announced that it will do another round of QE (although they claim that they don't want to devalue the USD!). Some expect it to be over $1T. Goldman Sachs says it will be $2T.

If they do it, the US Dollar will collapse. If they don;t, the markers will collapse.

The Fed will decide this in early November.

Here are straddles for the general stock market, IWM (Russel 2000 ETF), and gold (GLD ETF). Simple.

It's a little early for these. Computed with StraddlesCalc online tool.

Please do your own due diligence.

Thursday, October 21, 2010

Natural gas: storage and UNG disasters

Here is the natural gas storage as of today:

Note how the line has curved up in recent weeks, reflecting very large amounts of gas in storage. Storage is currently at 3.56Tcf, 1.3% lower than last year (which was a record high), and 8.4% higher than the 5-year average.

This is UNG, a big loser because of contango and roll-ups:

An absolutely dreadful ETF, unless you have been shorting it

Tuesday, October 19, 2010

Currency wars: big profits on currency ETFs

This is why you should trade currency ETFs if you want to capture the big gains. We track all currency ETFs live here.

Currency wars = volatility = potential big profits.

Friday, October 15, 2010

Investing in Brazil: 6 Brazilian ETFs Live

It is not a secret that the Brazilian stock market has done spectacularly in recent months and even years. There are now 6 ETFs that cover Brazil, for several investment objectives. They are:

BRAZ:   Global X Brazil Mid Cap,  $19.35
BRF:    Market Vectors Brazil Small Cap,   $61.
BRXX:    Brazil Infrastructure Index,    $25.12
BZF:    WisdomTree Dreyfus Currency BZ Real,   $29.52
EWZ:    iShares MSCI Brazil Index   $80.75
EWZS:    iShares MSCI Brazil Small Cap Index,   $28.84

Their returns since July are simply amazing:

BRAZ: 29.00%
BRF: 40.34%
BRXX: 26.56%
BZF: 10.19%
EWZ: 28.11%
EWZS is brand new

We are now tracking these live here.

Thursday, October 14, 2010

CYB, Yuan ETF appreciates impressively: big profits

While the US continues to hit China with a war of accusations with regards to the Yuan, the Chinese currency has appreciated handsomely and impressively, thank you very much.

We posted very cheap options on October 5, then CYB was trading at $.

Here is the current situation, showing the gains on CYB itself, and on those options.

Those are quite impressive gains for 1 week. Note that while CYB appreciated 0.82% (a huge move the the Yuan), the options rose between 7.69% and 20%. And those are long term options for January and April 2011!

Tuesday, October 12, 2010

Currency wars: wild fluctuations = big profits

Here is an update on currency ETF straddles for October (computed with (StraddlesCalc)

Currencies, and their ETFs, are absolutely wild, hence the high ROIs

Wednesday, October 6, 2010

Yen touches new record high; Yen ETF options

The Japanese Yen has just touched a new record high. Today is the day for options or straddles on the FXY ETF. Stay tuned.

Tuesday, October 5, 2010

Profit from the Chinese Yuan ETF very cheap options

There appears to be a discrepancy on the market with regards to some of the Chinese Yuan ETF (CYB) calls for 2011. They are very, very cheap.

For example, these are the 24 calls:

With CYB trading at $25.42, CYB 24 calls ask price is $1.50. That is  a 0.3% premium over the intrinsic value. While the standard disclaimer applies, that options are very dangerous and may cause 100% loss (which they well might), those are 24 calls, and the CYB has not reached $24 in quite some time, if ever.

Liquidity is relatively low, although the open interest is not too bad, but the market maker should satisfy any bids. This basically gives you leverage of about 17X on CYB.

Needless to say, the US wants nothing more than the Yuan appreciating.

Friday, October 1, 2010

Brazil ETF rocks

Here is a very nice video analysis of the Brazilian ETF.

Going Nuclear II: Companies and ETFs, Nuclear and Uranium

Nuclear energy is clean energy. Investors and institutions are pouring into nuclear and Uranium companies and ETFs in an attempt to profit from  the surge in alternative-energy initiatives.

We have created a new Tracking Live site for nuclear companies and ETFs. These are companies involved in the generation of nuclear energy in one way or another.

Track them live here! (click)