Tuesday, April 21, 2009

Will Leveraged ETFs Put Cracks in Market Close?

More nitty gritty behind the 3x leveraged ETF's. Want to know about those late day moves and how they might happen? Via Naked Capitalism's link to a site called Abnormal returns I found this post on The Daily Options Report that led me back to the WSJ where Saturday there was a post on Will Leveraged ETFs Put Cracks in Market Close?

"Now let's say the fund's net assets grow by $10 million during the day, to $110 million. The fund must raise its swap exposure from $200 million to $220 million to honor its 2-for-1 investment objective. That is $20 million in extra buy orders, all coming into the market after 3:30 p.m., typically in the final 10 minutes."

It is a short but interesting read. Click on the title of this post to go to the article.

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