Any potential pitfalls and traps about ETNs?

Discussion in 'ETFs' started by mizhael, May 26, 2010.

  1. especially the double long double short ETNs?

    I want to trade a few of them,

    but not sure about their pitfalls or traps or catches...

    If they are completely the same as ETFs, why aren't they called ETFs.

    So I am sure they have something that's special.

    But I cannot find anything deep about them, other than a few webpages...

    Any thoughts and pointers?

  2. ?.....tracking error, illiquidity, over-reactions at price extremes, excessive management fees, excessive portfolio turnover? :confused:
  3. The issuer defaults....
  4. Merrill won't let me trade in some of them because of undisclosed leverage. Not at all opposed to leverage but I do like to know what I'm getting into, in advance. Same goes for some ETFs.
  5. S2007S


    Time to move your account, any broker that wont let you trade your own money in an ETF is pretty pathetic.
  6. That was my first reaction too. But then I asked myself, do I want to buy pigs in pokes bad enough to sever the relationship?

    That led to the realization I don't want undisclosed leverage in my portfolio AT ALL.

    Risks I know in advance, and plan around?


    Risks I'm not even aware of until they burn me?

    Nope, not if I can help it

    Thanks, ML, I appreciate you taking my back.
  7. In theory we should short these ETNs for long term, similar to the logic behind shorting financial ETFs...

    I shorted ETNs but lost money...

    Any traps?

    Anywhere to read more indepth about ETNs?
  8. 1) ?.....Timing matters more than theory. :(
    2) Are those ETN's "hard to borrow"? :confused:
    2) The euro-geeks at wilmott may be willing to share their expertise. :D
  9. This has been discussed many times on ET. The search button is your friend.

    ETF = Exchange Traded Fund
    ETN = Exchange Traded Note

    ETN = Note = Debt Instrument and is only as good as the credit worthiness of the issuer whereas the ETF is owned by the shareholders of the Fund. If an ETF asset manager were to go under/close/go to jail/get hit by a bus, etc. the ETF/Fund's board of directors could select a different Asset Manager and the ETF would continue. If an ETN's issuer were to dissolve (look at some of the old Lehman ETNs) the ETN could go away.

    They gain their exposure essentially the same way except that they fall under slightly different regulatory requirements (Debt vs. 40 Act Fund).