A top ETF For Safe Income: dividends plus covered calls

Here is an ETF for income fro relatively safe stocks, plus extra income from selling covered cals: BMO's ZWU.

BMO Covered Call Utilities ETF has been designed to provide exposure to an equal weight portfolio of Canadian utilities, telecoms and pipeline companies, while earning call option premiums. The call options are written out of the money, selected based on the option's implied volatility, and are written in proportion to the securities weight. The option premium provides limited downside protection. The underlying portfolio is rebalanced in June and reconstituted in December. Options are rolled forward upon expiry.

Holdings:

Just Energy Group Inc	6.89%
Atlantic Power Corp	6.53%
Veresen Inc.	6.44%
Rogers Communications Inc	6.41%
TransCanada Corp.	6.31%
Enbridge Inc.	6.30%
AltaGas Ltd	6.26%
Capital Power Corp	6.26%
TELUS Corp.	6.25%
Cdn Utilities Cl A NVS	6.23%
BCE Inc.	6.21%
Fortis Inc.	6.16%
TransAlta Corp.	6.10%
Pembina Pipeline Inc	6.08%
Emera Inc.	6.07%
Manitoba Telecom Services	5.93%

Why UNG is Crashing

UNG is taking another tumble today. This story repeats itself over and over: contango and storage.

 Ouch.

Thursdays is in general due to storage. Here are today's figures:

That red line sticking above the 5 year channel is just dreadful. There is too much of the stuff.

Contango today is there too, but it's not so bad.:

Maybe now that the weather is colder things may change. Hope is the last to day for the dreadful UNG.

BZF and CYB ETFs distribute massive gains

BZF and CYB dropped significantly yesterday, but the reason is that they distributed massive gains. This happens at the end of every calendar year.

In the case of BZF, the drop was of $5.69, or over 22%.

$5.72 of this was the dividend.

Distributions:

The dreadful leveraged ETFs; Some still green after all these years

We track leveraged ETFs live here.

This is a partial capture:

As leveraged ETFs eventually lose their value, it is quite interesting to see that there are still some that are quite green.

Royal Bank of Canada loads up on GLD

GLD is the most popular gold ETF. While gold itself is taking a beating, RBC (ticker RY), or its clients, has been adding GLD is massive amounts.

At the end of June Royal Bank of Canada reported holdings of 1,142,143 shares with a market value of $166,752,878. At the time, this was about 0.16% of the total portfolio.

On 09/30/2011, Royal Bank of Canada reported holding 3,138,217 shares, with a market value of $496,026,571. This comprised 0.63% of the total portfolio. 

On Sep 30 GLD was trading at $158.08. Today, after a massive selloff it trades at $152.35.

Natural gas storage drops by 21Bcf: UNG Moves Higher

As expected, natural gas storage number showed a decline today. The actual figure was -21Bcf:

UNG moved higher, also as expected. Contango is still low at 0.9%:

Natural gas alert: contango diminishes, UNG attractive

Here is the current contango situation for natural gas this morning:

Contango in the frotn two miotnhs (January and February is 0.75%. As contango goes, this is quite low. While it does not mean that natural gas prices will rise, it means it is not so bad for UNG which suffers so much when contango is in effect.

From February to March the contango it is even lower at 0.26%.

UNG has dropped in recent two days, making it "interesting".


2 months:

6 months:

Dreadful, dreadful, dreadful, always dreadful.

Why natural gas and UNG spiked higher today, and what to expect

Storage inventories were released this morning showing the first decline of the season - finally, and barely.

Note how the storage touched the top of the 5-year channel, actually were just above it. Just in time!

UNG:

Natural gas prices,  however, are still in contango. Therefore, these spikes are usually only temporary. Rinse and repeat.

There is more to ETFs than you think

The Financial Post has a very good article today on the ciomplexity of ETFs and the way they trade. ETFs are no doubt better than mutual funds in most ways, but they do have certain complexities that not many people know about.

The author attended a session by PowerShares which it hosted  for advisors, covering the shortcomings of traditionalmarket-cap-weighted indexes (and ETFs tracking them) versus enhanced or "fundamental" indexing like that used by ETFs based on RAFI (Research Affiliates Fundamental Index.)

"The most interesting session was a panel involving three market makers and designated brokers. The stage was set in a backgrounder by Cooke on ETF liquidity, titled More than meets the eye. Because they're openended structures, ETFs don't trade precisely like stocks. Cooke argues stocks trade in an "auction" market with a fixed number of shares available. The value of a stock is determined "by the aggregate opinion of the outright value of the company in question." Based on all combined public investor opinions derived from publicly available information, the "correct" value of the stock is its current market price.

ETFs are different: Because of the way they are created and redeemed, they trade in an arbitrage situation. Bid and ask prices aren't arrived at through supply and demand of the ETF units themselves or by ETF unit trading volume. Rather, prices are determined by the value and liquidity of the underlying baskets of securities.

Or as Cooke summarizes, "ETFs do not trade like stocks. They trade like the sum of the stocks that comprise them." Designated brokers and dealers can create and redeem units to meet investor demand. They can also create extra units by assembling a basket of the stocks held in the ETF in the same relative weights, then exchanging the units for ETF units. For ETF redemptions, this is reversed.

One implication is there is a not a fixed number of ETF units in the marketplace, so liquidity of the ETFs is tied to liquidity of underlying holdings. Second, it allows designated brokers to spot arbitrage opportunities if the ETF trades at a discount or premium to net asset value.

Investors need to pay attention to market depth on ETFs and will be better off using limit orders rather than orders "at market." Cooke says market depth offers a more complete picture by revealing where the true liquidity on an ETF can be found. Sometimes market makers will post their best bids and best offers at prices reflecting the cost of hedging their market risk. This can create a "mirage" of liquidity based on small-sized bids and offers. "Market depth helps investors see where market makers post largersize bids and offers a better indication of where most ETF trades can be executed."

The main risk with a limit order is the risk of the whole trade not going through. But this is better than buying or selling at a hefty premium or discount to the ETF's worth. John Hoffman, PowerShares' director of institutional sales, suggested investors "avoid market orders. Always use limit orders when possible. A limit order ultimately protects you on price. A market order puts the priority on speed. A limit order is not protected on speed but on price of execution."
One advantage of ETF liquidity is sellers don't necessarily have to be matched with buyers. Cooke cites a real-life example from September. An institution wanted to buy almost 600,000 units of the PowerShares 1-5 Year Laddered Investment Grade Corporate Bond Index ETF (PSB/TSX), even though the average daily volume was only 10% of that amount. If this involved a single stock or bond, such an outsized order might push the price up, but in this case, the market maker created units by acquiring the underlying basket of liquid corporate bonds. The large trade was executed as a single block with minimal price disruption. "This illustrates how effectively even a large trade can be executed in a relatively illiquid ETF, assuming there is an investable basket of securities."

At the seminar, TD Securities vice-president Alex Perel observed that "fixed-income ETFs are by far the best deal for investors because of institutional pricing."
I came away with the impression there's more to choosing and trading ETFs than investors realize - and I dare say many advisors could say the same as they make the shift to ETFs from mutual funds"

The New Social Media ETF: SOCL

A new dot bomb or will it actually have growth? In this world of social apps, a new social media ETF has been launched by Global X: ticker SOCL.

With a management fee of 0.65%, it holds many U.S. as well as non U.S. companies. 37% exposure to China.

"The Global X Social Media Index ETF (“Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Social Media Index (“Underlying Index”)".

The Underlying Index tracks the equity performance of the largest and most liquid companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications. As of September 10, 2011, the Underlying Index had 26 constituents, 18 of which are foreign companies.

% of Net Assets	Name	Identifier	Market Price($)	Shares Held	Market Value($)
	10.83	NETEASE.COM INC ADR	64110W102	45.70	3,384.00	154,648.80
	10.56	SINA CORP US	2579230	77.96	1,934.00	150,774.64
	10.46	DENA CO LTD	B05L364	34.67	4,310.00	149,411.84
	9.82	TENCENT HOLDINGS LTD	B01CT30	20.04	6,998.00	140,265.71
	8.39	GREE INC.	B3FJNX6	35.42	3,384.00	119,859.15
	5.05	GOOGLE INC	38259P508	611.47	118.00	72,153.46
	4.98	GROUPON INC	399473107	24.03	2,962.00	71,176.86
	4.67	MAIL.RU GROUP-GDR REGS W/	560317208	30.70	2,172.00	66,680.40
	4.61	YANDEX NV-A	N97284108	23.51	2,800.00	65,828.00
	4.37	RENREN INC ADR	759892102	4.52	13,812.00	62,430.24
	3.94	PANDORA MEDIA INC	698354107	12.16	4,622.00	56,203.52
	3.52	UNITED ONLINE	911268100	5.27	9,530.00	50,223.10
	3.40	LINKEDIN CORP - A	53578A108	71.56	678.00	48,517.68
	2.41	NUTRI/SYSTEM INC	67069D108	11.42	3,014.00	34,419.88
	2.20	XING AG	B1JTY91	74.93	420.00	31,471.14
	2.08	MIXI INC.	B1BSCX6	3,718.52	8.00	29,748.12
	2.03	DEMAND MEDIA	24802N109	7.23	4,018.00	29,050.14
	1.96	REDIFF.COM INDIA LTD-ADR	757479100	9.19	3,040.00	27,937.60
	1.89	PCHOME ONLINE INC	B05DVL1	6.42	4,200.00	26,972.09
	1.06	SKY-MOBI LTD SP ADR	83084G109	4.21	3,590.00	15,113.90
	1.01	BUONGIORNO SPA	4572691	1.38	10,466.00	14,466.40
	0.89	THE9 LIMITED - ADR	88337K104	4.66	2,718.00	12,665.88
	0.80	PROMETHEAN WORLD PLC	B60B6S4	0.89	12,852.00	11,376.58
	0.57	GEEKNET INC	36846Q203	17.21	470.00	8,088.70
	0.47	QUEPASA CORP	74833W206	4.06	1,638.00	6,650.28
	-1.95	CASH	CASH	1.86	-14,967.01	-27,904.10

Natural Gas' Huge Contango: Kiss of Death for UNG; UNG Drop to $7.x

This is the current situation with natural gas prices:

There is currently a contango of 4.1% between the the two front month contracts. This is quite large. When this happens, UNg tends to underperformed. There has been contango for quite some time now, and anyone who bought UNG is painfully aware of the consequences.

In the meantime, UNG has now a 7 handle:

Absolutely dreadful.

Oil and USO: To the moon and down; how to profit either way

USO is the most popular ETF to track the price of oil. Oil has risen very significantly lately, in what many analysts deem is unjustifiable given the poor economic conditions.

As USO trades very near $38, it is in a perfect price range for straddles, which allow an investor to profit either way the price goes. The following are straddles for both November and December for USO, showing the moves required for the position to be profitable..

These are computed with StraddlesCalc

Options are dangerous and may cause 100% loss. Please do your own due diligence.

Europe's giant snow ball is falling down the hill: profit from a banks' collapse

Greece seems almost forgotten now that it has been replaced by Italy's woes in the news. The European leaders are now publicly discussing splitting the Eurozone into two. These are fascinating times, we can see the snow ball falling up the hill.

Below are straddles on XLF for November, computed with StraddlesCalc tool.

This wonderful tool indictaes the moves required by the underlying ETF to achive profitabiliyt.

If you think 6% or so is too much, these are the results from our previous straddles, from Oct 28:

+37% is not bad for about 10 trading days.


Please do your own due diligence. Options are dangerous and may cause 100% loss.

Cracks already appearing; is Europe really saved? Using XLF

Today Italy's 10-year bonds hit record yields, this after Europe was 'saved" yesterday..

The solution so widely advertised does not really solve anything. The issue is timing.

These are straddles for XLF, the most popular financial ETF. XLF is currently trading near at perfect $14.

Computed with the free StraddlesClac tool.

Options are dangerous and may cause 100% loss. Please do your proper due diligence.

Preparing For Bank Earnings Next Week With XLF

JPM reported earnings today and the market was disappointed, bringing XLF down. Next week, several other major banks and financial institutions will report, including MS and GS.

These are particular interesting as JPM reports deteriorating trading income.

These are in-the-money and out-of-the money straddles for next week:

Options are dangerous and may cause 100% loss (not the ITMs above though, which may only cause "significant" losses. Please do your own due diligence.)

ETFs For the Downgrades of Italy, Belgium, Spain

As our readers know, we track all global ETFs live here.

Yesterday, the ratng agencies downgraded Italy, while the exptactions were for Belgium. The ETF for Italy is EWI:

The ETF for Belgium the aptly named, EWK:

Note that they are strikingly similar.

As for Spain, it is EWP:

Natural Gas Contango Spreads Even More, Bad For UNG

Here is the current natural gas situation: contango of 8.53% in the front two months. Terrible news for UNG. The correlations are very high as contango causes UNG to swap for fewer and fewer contracts..

Bank of America, BAC's Kiss of Death

BAC has announced it will impose a $5 monthly fee on debit cards. We cannot envision this fee lasting for very long as the backlash will be horrendous for the bank, a la Netflix.

It is truly a sign of desperation and that the bank must be severely cash-strapped. If my bank did that, I'd switch banks right away.

It's not like people have much love for banks these days anyway. What were they thinking?

There is nothing to like on BAC's chart:

Below are straddles for BAC and XLF, computed with the wonderful StraddlesCalc.

Not advice! Options are dangerous and may cause 100% loss. Please do your own due diligence.

Nat Gas and UNG Falls off a cliff, attacked by all sides: Huge contango, hurricanes, storage

UNG is falling off a cliff today, as pretty much expected here. It is suffering from an attack from all sides.

Meanwhile, there are no expected hurricanes in the near future:

Storage numbers were released today, showing a large injection of 11Bcf.

Contango today is nasty, at a whopping 7% for the two front months (December and November)

Bad news all around for UNG.

Total breakdown in Germany: Parliament passes bailout that majority oppose

In a sign of complete disconnect and breakdown between politicians and the people they are supposed to represent, the German parliament has just backed the expansion of the European bail-out fund.


523 politicians voted in favor of it, 85 opposed, three abstained.That is 85.6% in favor.

However, a poll released yesterday showed that 75% of Germans opposed any new bailout measures. The WSJ reports: "A poll for national German broadcaster ZDF earlier this month shows three-quarters of Germans are against the expanded European rescue fund that's subject to Thursday's vote."

EWG is the ETF for Germany, FXE the most popular for the Euro.

We also track global countries ETF live and global currency ETFs live:

More Leveraged ETF Torture: 2X ETFs Become 3X ETFs

As if we needed more leverage!

Direxxion is changing its 2X ETFs into... 3X.

"Currently, the investment objective of each of the funds with “Bull” in its name is to seek daily investment results, before fees and expenses, of 200% of the fund’s target index. The investment objective of each of the funds with “Bear” in its name is to seek daily investment results, before fees and expenses, of -200% of the fund’s target index.
Effective December 1, 2011, each fund’s investment objective will be changed to seek daily investment results, before fees and expenses, of 300% or -300% of the performance of its specific target index".

The fact that 300% actually means 4X is too complicated math of course.

The higher the X, the faster the ETF's value goes to zero.

At least it's tough to do 4X though, as the fund risks having to drop it's value to zero in a single day if the market moves 25%.

Bad for UNG: huge natural gas contango to december

This is the current situation with natural gas contango:

It is currently 0.65% for November and October, and a whopping 7.2% from December to October. This implies prospects of prices rising, however, the contango is very bad (high) for UNG for December. Not good.

Gold ETFs Jump as Buying of Physical Gold is Intense

A report by Reuters today confirms that physical gold buying has been "exceptional", taking today's prices much higher. With it, gold ETFs are soaring, as expected.

We track all gold ETFs live here.


"... Meanwhile, heavy buying of physical gold stocks -- often a price-sensitive area of demand -- suggested that Monday's price fall had whetted investors' appetite for the metal.

Swiss bank UBS said it had seen very strong physical buying in Asia, particularly number one bullion consumer India, on Monday. "To be clear, physical demand right now is not just decent, it is exceptionally strong," the bank said.

Other precious metals also bounced back after Monday's hefty losses. Silver, which slid as much as 16 percent to a 10-month low of $26.04 an ounce on Monday, rose more than 9 percent to a high of $33.48 an ounce.

Spot platinum was up 1.3 percent at $1,575.50 an ounce, while spot palladium was up 3.7 percent at $650.22 an ounce.

Gold's premium over platinum stood at around $90 on Wednesday, with a ratio of 1.06, its highest in 20 years".

FXY and the next Bank of Japan intervention; a la Swiss? Yes, says Nissan.

The question is not If but When will the bank of Japan intervene to lower the yen.

Today, a Nissan Motor Co. senior executive urged Japan to take "decisive" action to prevent the strong yen from hollowing out the country's industrial base. He also mentioned that they should learn from Switzerland's intervention in the foreign-exchange markets to weaken its currency.

Can you imagine if all central banks had the funds to intervene to lower their currencies? "I have more money to weaken my own currency than you!".

Here are current FXY straddles, from the wonderful StraddlesCalc tool.

Options are very dangerous and may cause 100% loss. Please do your own due diligence.

Surviving - And Profitting - From Meltdown or Wild Monday, With ETFs

Gold and silver were severely beaten up in these last two days, and there are even more renewed talks of a Greek default. The possibilities were even mentioned by the Greek finance minister himself. Some say this could be prelude to major weekend action.

A meltdown Monday, or a massive injection of money and stimulus will cause the market to move wildly.

Below are straddles computed with StraddlesCalc tool.

As always, options are very dangerous and may cause 100% loss. Please do your own due diligence.

Contango and The Dire Effects on UNG Once Again Proven

On Setember 14 we posted about the state of contango an its dire effects on UNG. This is precisely what happened.

Buyer beware.

New ETF To Be Launched Trades Based on Share Buybacks

This is quite interesting.

A new ETF is being launched in early October and invests based on share buybacks by companies.

The TrimTabs Float Shrink ETF (symbol TTFS) will open for trading on Wednesday, October 5, 2011. The portfolio management team of TTFS is a part of TrimTabs Asset Management (“TrimTabs”).

TTFS’ investment objective is based on TrimTabs proprietary research, which measures the "change in float shrink" (net change in number of shares outstanding), the change in free cash flow (after tax income + non cash charges – capital expenditures) and net debt issuance.  The strategy selects the top 100 U.S. stocks based upon float shrink, free cash flow growth and net equity ratios from the largest 3,000 U.S. based companies.  Those 100 stocks are then equally weighted and periodically reallocated and rebalanced as corporate metrics change. 

The premise here is that share buybacks are a good indicator of stocks going up. Sounds very reasonable.

Charles Biderman is the founder and Chief Executive Officer of TrimTabs. He says that “Top insiders at a firm know more about its fundamentals than the investing public. We have discovered that it has been strategic over the years to buy the overall market when the trading float of shares is shrinking; and to sell the overall market when the trading float of shares is growing.  We have discovered that float shrink, free cash flow and debt/equity analysis have been good indicators in determining future performance of stocks.”

Noah Hamman, CEO and Founder of AdvisorShares. : “We believe investors will be excited about TTFS because it is a fundamentally attractive alternative for U.S. equity market exposure to a Russell 3000 or S&P 500 Index. Why own the entire U.S. market when you can buy the 100 companies shrinking their trading float of shares, growing cash flow and not borrowing to buy back shares?”

Natural Gas Results: +220% ROI UNG

This was from yesterday.'s post

ROI was 220% for the September straddles (as of 2:10PM).

Contango Strikes Back In Full Force; Natural Gas and UNG Poised to Explode

Which way is the question, but that is matter?

The price of natural gas has held relatively steady in recent weeks.While this is good news for investors in the commodity, contango is now back in full force.

Contango means very bad enws for UNG as it has to pay more every month to roll over its
contracts: same money, fewer contracts. This is buyer beware.

This is however, hurricane month and season, all the makings for a very interesting - and volatile -  combination. Just near perfect.

Below are straddles for UNG for both September and October 2011. These allow an investor to profit either way, up or down.

September only has 2 more days to go and is an obvious extreme risk. October requires an 8% move or so for the position to become profitable.

This is not advice. Options are very dangerous and may cause 100% loss. Please do your own due diligence.

The German courts decide on bailout legality: Effects on the Euro ETF, FXE, GLD, ad TLT

The German courts decide tomorrow whetehr the European baiklouts are illgeal. While they seem to be, it is unknow if the courts will be willing to say so. Either way, the Euro will move, and so will the markets, gold, and bonds.

Below are straddles for FXE, GLD, and TLT.

Computed with StraddlesCalc.


Please do your own diligence. Options are very dangerous and may cause 100% loss.

ETFs, Bernanke, and The Tooth Fairy: Profit Either Way From Jackson Hole Decisions; The Perfect Setup

Many are expecting Bernanke to save the world and engage an another massive 'kick the can down the road" exercise tomorrow, i.e, QE3.

As such, QE3 may already be built-into prices.  If Mr. Fisher is right, and Bernanke is not the tooth fairy, the market swill be disappointed, and prices will reflect this. If QE3 happens, then gold will resume its parabolic move. It's a perfect setup.

Here are straddles on popular ETFs, to profit either way, up or down. Computed with StraddlesCalc.

Given the volatility, massive moves are possible, and so are profits, as were our past straddles last month.

This is not advice. Options are dangerous and may cause 10% loss. Please do your own due diligence,.

As gold goes parabolic, gold and silver ETFs soar higher

We track gold etfs live here at http://goldetfs.nexalogic.com. Here is the latest:

There are several returns in the hundreds of percentage points.

On Market Collapses and 4X Profits on ETF Straddles, IWM, FXY, USO

Here's the current update on the ETF starddles:

An ROI of +290%, is just about a 4X return, not bad.

With 1 day to go in August, that is pretty much over, so we now look at September.

Here are new straddles for September: