Double Your Profits, Double Your Losses… in GOLD, FINANCIAL SERVICES, ENERGY
Sunday, July 1st, 2007With just three ETF providers in Canada so far, it’s pretty easy for us to gather the latest news from each and pass it along to you here.
In earlier updates we’ve talked about Baclay’s iShares and Claymore’s latest ETFs. Look to our back issues… the info won’t be out of date for quite a while.
This time we continue coverage of the Horizons Betapro ETFs. We’ve already discussed their Bull and Bear S&P/TSX 60 ETFs last time. That detailed analysis should be reviewed again if necessary to appreciate the fact that these are leveraged investments. Whether you are calling for rising or dropping prices, you double the movement in the underlying index if the index moves in the direction you forecast. If the underlying index moves 1%, your ETF moves 2% if you’ve picked the right ETF. Naturally, if you’ve picked the wrong one, you lose at twice the pace of the index.
Indications so far are that these leveraged ETFs are enormously popular. Of the 50 or so ETFs offered in Canada (yes, we’ll catch up eventually!), the Betapro S&P/TSX 60 Bear Plus ETF is the second most actively traded… with some 600,000 shares moving daily. The Betapro S&P/TSX 60 Bull Plus ETF is sixth most active, with 100,000 shares traded daily. These vehicles are particularly good for short-term traders who want to capitalize on anticipated “shocks” (i.e. volatility spikes) in the markets.
Well, BetaPro Management Inc has followed through with several sector-specific ETFs based on the same principle… tracking indexes for FINANCIAL SERVICES, ENERGY and GOLD. Naturally, each of those represents a pair of ETFs.. one for the bullish side and one for the bears. The latest six funds (2×3) were introduced in June, so it’ll be a while before we can share trend and consistency values in our DATA & CHARTS workbook.
Here are the indexes they track and the trading symbols: FINANCIAL SERVICES tracks the S&P Capped Financials Index (Bull: HFU, Bear: HFD), ENERGY tracks the S&P/TSX Capped Energy Index (Bull: HEU, Bear: HED), and GOLD tracks the S&P/TSX Global Gold Index (Bull: HGU, Bear: HGD).
The latest three pairs had an initial unit value of $20 ,and management fees are 1.15%… higher than more traditional ETFs; but you’re presumably paying for the implementation of the algorithms they require to maintain the doubling effect and related trading costs.
Visit the BetaPro web site for more detail on all BetaPro ETFs discussed here, and perhaps others that they have in the pipeline.