Shorting closed end funds

Discussion in 'Trading' started by kidPWRtrader, Aug 29, 2007.

  1. I don't really know what the reason is that they arn't shortable? The patterns have been so bearish and everytime I see a new one i get excited only to place the order and have it be rejected.
  2. I can short most of them at IB. Some of the tiny capitalization ones are hard to borrow. Watch out, many CEFs pay big dividends that you have to pay being short.
  3. Hmm... I just signed up to MBtrading.

    Not 21 unfortunetely so that sucks considering I wanted to sign up to IB. Still better than scottrade though...
  4. Cause they are closed ended. Shorts need not apply. once the fund is closed your stuck.
  5. Neodude


    I might have misunderstood the original poster, but generally:

    closed end = ETF
    open end = Mutual Fund

    If the ETF has enough shares issued, it should be shortable.

  6. Closed-ended funds are NOT ETFs. They're a set of investment vehicles usually designed for yield, mainly holding equities and bonds. See

    ETFs usually do not trade at discounts to NAV (thanks to arbitrage), many CEFs usually do due to the fact they're closed-ended.
  7. Neodude


    I stand corrected.

  8. Although this is off topic ETF tens to be much better than closed end funds
  9. Really hard to compare both, they serve different purposes. If your goal is equity/bond exposure combined with monthly dividends then CEFs can do the job, at a discount to NAV which can serve as a margin of safety. Most ETFs do not pay (big) monthly dividends but they almost always trade very close to their intrinsic NAV and are more liquid/have smaller bid/ask spreads than most CEFs.
  10. I used to own GF (germany fund) which was a closed end fund and it became extremely volatile and underperformed its underlying asset. Since it uses a standard bid/ask system a single seller could drive the fund much lower without much effort.
    #10     Aug 29, 2007