Forums (http://www.elitetrader.com/vb/index.php)
- ETFs (http://www.elitetrader.com/vb/forumdisplay.php?forumid=62)
-- Leveraged Inverse ETFs and Reverse Splits (http://www.elitetrader.com/vb/showthread.php?threadid=234571)

Posted by the on 01-12-12 11:00 PM:

Leveraged Inverse ETFs and Reverse Splits

I called ProShares the other day to try to find out if there are any rules to a Reverse Split and they were pretty vague. They told me they perform a reverse split based on what market participants tell them, i.e. the MMs and investment advisors.

Anybody have any more information on when a reverse split happens?

Also, anybody experience a reverse split on an ETF before? If so, how far in advance do they announce a reverse split?

Posted by bwolinsky on 01-14-12 11:17 PM:

Re: Leveraged Inverse ETFs and Reverse Splits

Quote from the:

I called ProShares the other day to try to find out if there are any rules to a Reverse Split and they were pretty vague. They told me they perform a reverse split based on what market participants tell them, i.e. the MMs and investment advisors.

Anybody have any more information on when a reverse split happens?

Also, anybody experience a reverse split on an ETF before? If so, how far in advance do they announce a reverse split?


This question is not relevant, but you can figure they'll do a split or, more likely, the reverse split when market makers tell them commission's killing them, or the effects of negative daily compounding reduce the ETF by more than 75% between each reverse split. That's been the sweet spot, and QID now has reverse split adjusted prices of $250, so when it breaks lower lows by 50-80% they'll do a reverse split. There won't ever be a split, only reverse splits.

There's a possibility of a split in the 2x leveraged longs, but only a possibility of reverse splits for the all other leveraged inverses.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by WinstonTJ on 01-15-12 05:51 AM:

Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from bwolinsky:

This question is not relevant, but you can figure they'll do a split or, more likely, the reverse split when market makers tell them commission's killing them, or the effects of negative daily compounding reduce the ETF by more than 75% between each reverse split. That's been the sweet spot, and QID now has reverse split adjusted prices of $250, so when it breaks lower lows by 50-80% they'll do a reverse split. There won't ever be a split, only reverse splits.

There's a possibility of a split in the 2x leveraged longs, but only a possibility of reverse splits for the all other leveraged inverses.


3x'es have split so I hope that was a typo on the "they won't ever split".

You are just generally wrong in your overall assessment. The target NAV of an ETF has zero to do with the market makers or the split-adjusted-price.

Think of it as a discretionary call. If I manage a risky & dangerous product I am usually pretty well aware. I'm also aware that I make money based on basis points of assets under management held overnight - so I need people to own my ETF - but I also want to make sure the right people own my ETF.

If it gets below $5 some people can't buy and a lot of people can't sell it. If it gets over $60-$100 then the retail folks start to feel the BP (buying power) pain so they don't trade.

There is a bit of a sweet spot - it isn't $6 to meet that $5 threshold because then every retail idiot in the world will be gambling - so best to keep it high so you weed out the people with no business being in the ETF - best also to keep it low enough (under $200 or so) so that people can actually trade round lots.

Really it is called fiduciary responsibility and that means that the manager has your best interest. If you are worried about a split or action perhaps you should consider a different speculation vehicle. The manager may not want you to be in the ETF so the split may be against what you want - they may price you out to the high or low side.

Call them. If you have any clout they will talk to you. If you get the runaround from an internal wholesaler then you probably shouldn't be trading a levered ETF if you are worried enough to call them up over something that's public and filed with the regulators.

Posted by sledgeyum on 01-17-12 10:11 PM:

Re: Leveraged Inverse ETFs and Reverse Splits

Fas/faz.. day of split when u look at it.,no announcement.

Both where under $8 and falling.. at the same time!!


Quote from the:

I called ProShares the other day to try to find out if there are any rules to a Reverse Split and they were pretty vague. They told me they perform a reverse split based on what market participants tell them, i.e. the MMs and investment advisors.

Anybody have any more information on when a reverse split happens?

Also, anybody experience a reverse split on an ETF before? If so, how far in advance do they announce a reverse split?

Posted by Rodney King on 01-17-12 10:16 PM:

Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from bwolinsky:

There's a possibility of a split in the 2x leveraged longs, but only a possibility of reverse splits for the all other leveraged inverses.


http://bit.ly/xieN6P

Posted by bwolinsky on 01-19-12 12:45 AM:

Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from WinstonTJ:

3x'es have split so I hope that was a typo on the "they won't ever split".

You are just generally wrong in your overall assessment. The target NAV of an ETF has zero to do with the market makers or the split-adjusted-price.

Think of it as a discretionary call. If I manage a risky & dangerous product I am usually pretty well aware. I'm also aware that I make money based on basis points of assets under management held overnight - so I need people to own my ETF - but I also want to make sure the right people own my ETF.

If it gets below $5 some people can't buy and a lot of people can't sell it. If it gets over $60-$100 then the retail folks start to feel the BP (buying power) pain so they don't trade.

There is a bit of a sweet spot - it isn't $6 to meet that $5 threshold because then every retail idiot in the world will be gambling - so best to keep it high so you weed out the people with no business being in the ETF - best also to keep it low enough (under $200 or so) so that people can actually trade round lots.

Really it is called fiduciary responsibility and that means that the manager has your best interest. If you are worried about a split or action perhaps you should consider a different speculation vehicle. The manager may not want you to be in the ETF so the split may be against what you want - they may price you out to the high or low side.

Call them. If you have any clout they will talk to you. If you get the runaround from an internal wholesaler then you probably shouldn't be trading a levered ETF if you are worried enough to call them up over something that's public and filed with the regulators.


They have reverse split, that's different than split. I'm saying they will only reverse split.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by bwolinsky on 01-19-12 12:46 AM:

Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from Rodney King:

http://bit.ly/xieN6P


So tell me why all leveraged ETF's won't decline 90% in the next ten years, genius?

You are clueless investing public to me.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by sledgeyum on 01-19-12 11:04 PM:

Re: Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Didn't upro?

Quote from bwolinsky:

They have reverse split, that's different than split. I'm saying they will only reverse split.

Posted by bwolinsky on 01-19-12 11:11 PM:

Re: Re: Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from sledgeyum:

Didn't upro?


I see 3:1 at $83 per share, now trading at $68 per share.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by WinstonTJ on 01-20-12 05:06 AM:

Re: Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from bwolinsky:

They have reverse split, that's different than split. I'm saying they will only reverse split.


I'm 100% certain that one of the 3x ETFs did a forward split not too long ago (made the price smaller with more shares) but I don't remember which one.

I'm not home right now and only on the netbook so I don't have Bloomberg, databases, etc. but I'll look it up and post the ticker.


It is only one of them (could have been FAS or FAZ) and it's the first one ever to have done it.

I will find it and post.

Posted by Rodney King on 01-20-12 12:48 PM:

Re: Re: Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from WinstonTJ:

one of the 3x ETFs did a forward split not too long ago (made the price smaller with more shares


FAS, 3:1 split, ex date 5/5/10, http://direxionshares.com/pdfs/Forward_Split_QA.pdf

Posted by bwolinsky on 01-20-12 10:49 PM:

Re: Re: Re: Re: Re: Leveraged Inverse ETFs and Reverse Splits

Quote from WinstonTJ:

I'm 100% certain that one of the 3x ETFs did a forward split not too long ago (made the price smaller with more shares) but I don't remember which one.

I'm not home right now and only on the netbook so I don't have Bloomberg, databases, etc. but I'll look it up and post the ticker.


It is only one of them (could have been FAS or FAZ) and it's the first one ever to have done it.

I will find it and post.


TQQQ also split 2:1.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by savagemp5 on 02-06-12 03:47 PM:

Its simple , a few more years of trading and u'll understand.

1) The prices have an appeal factor. Trying buy/sell a stk that's $9000 vs a stock thats $15.

2) Option pricing. The smaller or bigger the prices, the impact on the options markets (which generates alot of volume, hence the term derivatives). Similar the MM and IB will want it at a range suitable for all types of market players and generate lots of volume.

3) Rules of shorting and etc. A high price means it may be harder to borrow due to 1. and 2. And therefore we see the same thing, shorters being force to return on market open, risky stuff etc.

4) Fees based on no. of Shares, affected by share price. To hedge a $50,000 value of 3x finance, I may need to have 5000 shares of $10, vs 500 shares of $100. The cost of 5000 shares is much much more than 500, and that slippages and risk will kick in.

__________________
Random Walk with EMH ?

Posted by sledgeyum on 05-02-12 10:19 PM:

Re: Leveraged Inverse ETFs and Reverse Splits

Proshares announced last week their split schedule for may 2012.

SPXU will be reverse split 5:1


Quote from the:

I called ProShares the other day to try to find out if there are any rules to a Reverse Split and they were pretty vague. They told me they perform a reverse split based on what market participants tell them, i.e. the MMs and investment advisors.

Anybody have any more information on when a reverse split happens?

Also, anybody experience a reverse split on an ETF before? If so, how far in advance do they announce a reverse split?

Posted by bwolinsky on 05-02-12 10:38 PM:

SQQQ is going reverse 1:4.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by murray t turtle on 05-04-12 10:20 PM:

Re: Leveraged Inverse ETFs and Reverse Splits

Quote from the:

I called ProShares the other day to try to find out if there are any rules to a Reverse Split and they were pretty vague. They told me they perform a reverse split based on what market participants tell them, i.e. the MMs and investment advisors.

Anybody have any more information on when a reverse split happens?

Also, anybody experience a reverse split on an ETF before? If so, how far in advance do they announce a reverse split?

=============
Yes they did that on me in URE;
no notice[that i was aware of . Think it revrse split - 5 shares split into 1. Had an even # of shares.Double checked that, it did split 5 shares into 1[The news called it 1 to 5, but for sure price went up ,vol down[reverse split]

At first glance though i was in overnight gap heaven again .....

__________________
murray t turtle,nickname,not an alias

All times are GMT. The time now is 05:18 PM.

Copyright © 2012 Elite Trader.