ETFs or Exchange Traded Funds have become an extremely effective trading tool. They offer many advantages to a trader and provide accessibility to trading strategies that were difficult to accomplish for individual traders in the past. A key advantage is that they can provide the diversity of an entire sector vs trying to pick a single stock within that sector.
And options traders love ETFs. In fact, the most highly liquid options are in the SPY, the ETF that tracks the S&P 500.
There are a number of financial institutions that create and manage ETFs and as a result there are often multiple ETFs based on the same sector or group of assets. The important element to remember is that not all ETFs are created the same.
The two major types are Market Weighted and Equal Weighted. Market Weighted ETFs give more weight to stocks with larger market cap. If you have 10 stocks in an ETF, one may have a weight of 3 while others may have a value of less than one.
An Equal Weighted ETF made up of 10 stocks would give each stock a weight of 10.
Take a look at a chart of SPY, a Market Weighted ETF:
Because the elements of SPY with larger market caps will have a bigger influence on the price move, there is a tendency for these ETFs to jump a bit more if a heavy component has some type of big event.
Conversely, Equal Weighted ETFs will smooth out those bumps a bit. Another strategy that these two types of ETFs contribute to is that a heavy component of a Market Weighted ETF make be the first in the sector to move and pull the whole sector along with it. In this case the Market Weighted ETF may lead the Equal Weighted ETF and offer an opportunity to get in before the move happens.
Keith Harwood helped us understand these types of ETFs a lot better. If you want to see more of the ways he spots trades that many others miss, grab his Market Maker Cheat Sheet and get the edge the pro traders don't want you to have.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
See Related Articles on TradeWinsDaily.com
A Major Factor For ETFs and ETF Options
Bullish Momentum Pushing IBKR Higher
Chart of the Day: Revisiting Lithium Americas (LAC)
fuboTV Inc. Move Means Potential Profits
© 2022 Tradewins Publishing. All rights reserved. | Privacy Policy | Terms and Conditions | Contact Us
Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by TradeWins. For additional information on auto-trading, you may visit the SEC's website: All About Auto-Trading, https://www.sec.gov/reportspubs/investor-publications/investorpubsautotradinghtm.html
TradeWins does not recommend or refer subscribers to broker-dealers. You should perform your own due diligence with respect to satisfactory broker-dealers and whether to open a brokerage account. You should always consult with your own professional advisers regarding equities and options on equities trading.
1. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the "Services") is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by TradeWins Publishing ("TradeWins") a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. The Services are intended to supplement your own research and analysis.
2. TradeWins' Services are not a solicitation or offer to buy or sell any financial products, and the Services are not intended to provide money management advice or services.
3. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk. Trading on margin carries a high level of risk, and may not be suitable for all investors. Other than the refund policy detailed elsewhere, TradeWins does not make any guarantee or other promise as to any results that may be obtained from using the Services. No person subscribing for the Services ("Subscriber") should make any investment decision without first consulting his or her own personal financial adviser, broker or consultant. TradeWins disclaims any and all liability in the event anything contained in the Services proves to be inaccurate, incomplete or unreliable, or results in any investment or other loss by a Subscriber.
4. You should trade or invest only "risk capital" money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more.
5. All investments carry risk and all trading decisions made by a person remain the responsibility of that person. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Subscribers should fully understand all risks associated with any kind of trading or investing before engaging in such activities.
6. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. TradeWins makes no representations or warranties that any account will or is likely to achieve profits similar to those shown.
7. No representation is being made that you will achieve profits or the same results as any person providing testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have experienced losses.
8. The author experiences are not typical. The author is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position and other factors. Certain Subscribers may modify the author methods, or modify or ignore the rules or risk parameters, and any such actions are taken entirely at the Subscriber's own election and for the Subscriber's own risk.
|
没有评论:
发表评论