Single stock inverse ETF

Discussion in 'ETFs' started by Here4money, Jan 3, 2017.

  1. Here4money

    Here4money

    Hey guys, I'm not too familiar w/ETF's and was wondering if there's a list somewhere for inverse ETF's for single companies? Sometimes I want to take a short position but don't have the capital to do it w/o going naked and I figured this would reduce exposure.

    I realize there's short sector ETF's but want to know for single companies specifically.
     
  2. Sig

    Sig

    No such animal, although the site etfdb.com is the best ETF screener I've found if you're looking for something similar in the future. Single Stock Futures are a thing, but sadly out of hundreds offered only a handful have any bids/offers or anyone who will hit a bid or offer if you put it out there. You might also think about a vertical spread to limit your max loss and hence margin requirements.
     
    comagnum likes this.
  3. You could sell a Delta 1 Single Stock Future.
     
  4. Sig

    Sig

    Since we've got you, any updates on efforts to increase liquidity and/or get market makers for SSFs? I so want you to succeed with them, but they pretty stubbornly continue to have no liquidity.
     
  5. Liquidity is in the eye of the beholder. We do not have thousands of 1 lots massed on the bid and ask 1 to three ticks apart. Our liquidity comes in the form of large size trades going up at one price in one transaction with the majority of these trades being completed via spreads. Spreads are utilized by sophisticated parties to replace Securities Lending and Equity Repo processes. There are some customers (mainly IBKR) who do take advantage of this but not many.
    We do not cater to day trading - in fact we put barriers up to discourage it - but aim at investors who carry positions for a particular term and are very sensitive to the interest rate they will be exposed to for the duration. Since our products are really an interest rate trade there are difficulties in getting market-makers to make meaningful markets when our pricing is currently constrained to two decimal places as it does not provide the appropriate resolution for interest rates. 97% of our transactions take place at a 'price' that goes out to the fourth decimal place - a basis point - but they all occur outside of our Central Limit Order Book for outright trading of SSF.
    This is soon to change. After a protracted back and forth with the SEC an agreement has emerged to allow us to offer 4 decimal pricing for our CLOB on a pilot program basis. We believe that this increased resolution will attract additional market-makers who are natural liquidity providers in these types of equity financing trades.

    Best
     
    iprome likes this.
  6. Sig

    Sig

    That's great news! The main reason I'd like to be able to use SSF is for exactly what you stated, access to the full interest rate when lending a stock. Right now it's impossible to get more than half the borrow rate when you lend a stock, usually you get nothing. SSFs allow you to get 100% less your transaction costs, which opens up a lot of strategies if those transaction costs are reasonable. Thanks for the update.
     
  7. haroldg

    haroldg

    I think OneChicago is talking about GC names. With respect to tight HTB pricing, I wouldn't get my hopes up.
     
  8. HTB as well. Transfer the underlying and replace with a Delta 1 equivalent derivative priced at a discount which represents the borrow fee. Locking in the fee is a double edged sword as it can't be recalled if rates decline but you can reprice if rates go higher.
     
  9. Sorry...my poor typing:

    "......but you can't reprice if rates go higher.
     
  10. Sig

    Sig

    There are a lot of securities that aren't necessarily HTB but have borrow rates significantly greater than the margin rate, i.e. 7-10% range, which are the sweet spot. Unfortunately you're probably right, but we can always hope!
     
    #10     Jan 3, 2017