Why Would You Trade ETF's?

Discussion in 'ETFs' started by RAF618, Feb 22, 2008.

  1. ETFs have Options...IWM & QQQQ's are penny spreads. SPY & QQQQ have Ultra Long & Short's(2X price movement).

    Why by the stock when you can get almost the same price range as the underlying using synthetic longs/shorts, for small change or even a credit?

    Use the same market timing tactics as you would trading futures...
    #11     Feb 23, 2008
  2. Gyles


    Exchange Traded Funds (ETF) are like Mutual Funds, however, they trade like stocks and can be purchased on margin.

    The above means that if you are having a $4000 account (cash), you can borrow only this much available money (cash) for stocks totalling 8000 numbers. You will need to pay interest on that remaining 4000.00 shares, in the range of 8%-10%.

    Thus, it shows that you are required to pay interest. It also means that break even trades can cost you money. You could lose up to 10% by breaking even.

    Moreover, you are required to repay the money (loan) back with interest even if have to lose your money. Thus, if you buy 8000 in stock for $4000, which is now worth $5000. You have lost $3000. However, you have no option but to repay the one back first, which means that you shall have only $1000 in your account for your next trade of 4000-1000.
    #12     Feb 27, 2008
  3. S2007S


    speaking of ETFS, just bought some SDS.
    #13     Feb 27, 2008