Leveraged ETFs (6 Sep 11)

Leveraged ETFs

A Leveraged ETF offers the investor a simple way to buy a broad index or sector with double or triple the exposure of the underlying index. A Leveraged ETF will allow investors to put a leveraged bet on either side of the market, long or short.  This means that you can buy a 2x or 3x bearish ETF which will increase when the market heads south; these are commonly referred to as inverse leveraged ETFs.  Conversely, you could buy a 2x or 3x bullish fund which will increase when the market moves higher.  These instruments are particularly useful for gaining exposure to the bearish side of the market in a rollover IRA or traditional IRA, where margin and short selling are restricted. 

ProShares UltraShort Financials (SKF) $78.30

Profit Target (20%): $93.95  

Trailing-Stop (ATR x 2): $11.96

ProShares UltraShort Russell 2000 (TWM) $53.74

Profit Target (20%): $64.50  

Trailing-Stop (ATR x 2): $8.90

Direxion Financial Bear 3X (FAZ) $60.62

Profit Target (20%): $72.75 

Trailing-Stop (ATR x 2): $13.86

ProShares UltraShort S&P 500 (SDS) $24.22

Profit Target (20%): $29.05  

Trailing-Stop (ATR x 2): $2.94

ProShares UltraShort Oil & Gas (DUG) $33.12

Profit Target (20%): $39.75  

Trailing-Stop (ATR x 2): $4.84

Trading leveraged ETFs comes with a significant amount of risk, especially if the market begins moving against you. This is why advisers recommend using a stop loss order.  A trailing stop  causes a stock to be sold if it falls a particular dollar amount from the most recent high.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Traditional ETFs (6 Sep 11)

Traditional ETFs

A Traditional ETF is essentially an index fund that trades like a stock.  There are traditional ETFs covering everything from broad stock indexes to individual commodities.  These ETFs are useful tools for inexpensively diversifying your portfolio, and they are available in all major asset classes.  If you generally like to pick individual stocks but you don’t know much about a certain sector or region, you could use an ETF to complement your stock allocation so that you’re more broadly diversified.

iPath S&P 500 VIX (VXX) $41.48

Profit Target (15%): $47.70  

Trailing-Stop (ATR x 2): $5.80

SPDR Gold Shares (GLD) $183.24

Profit Target (15%): $210.75  

Trailing-Stop (ATR x 2): $8.50

Market Vectors Gold Miners (GDX) $64.91

Profit Target (15%): $74.65  

Trailing-Stop (ATR x 2): $4.36

iShares 20+ Year Treas Bond (TLT) $112.51

Profit Target (15%): $129.40  

Trailing-Stop (ATR x 2): $5.00

iShares Silver Trust (SLV) $42.18

Profit Target (15%): $48.50 

Trailing-Stop (ATR x 2): $2.80

Like stocks, ETFs are traded on major U.S. stock exchanges and can be bought and sold anytime during normal trading hours.  Because of their diversification, the price movement in ETFs is more predictable than in individual stocks.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Long Call (6 Sep 11)

Long Call (ETFs)

A Call option gives the buyer the right to buy stock at a specific price (strike price) on or before a specific date in the future (expiration date).  When you purchase a Call option you are basically betting that the price of the underlying stock will rise.  The Call buyer loses money if the underlying stock does not rise before the expiration date.

VXX  $41.48

Buy to Open (1) Jan 12 42 C @ $8.10 

Net Debit: $8.10 ($810.00)

Profit Target (50%): $12.15 ($1,215.00)

Stop-Loss Point (50%): $4.05 ($405.00) 

GLD  $183.24

Buy to Open (1) Jan 12 185 C @ $11.70 

Net Debit: $11.70 ($1,170.00)

Profit Target (50%): $17.55 ($1,755.00)

Stop-Loss Point (50%): $5.85 ($585.00) 

GDX  $64.91

Buy to Open (1) Jan 12 65 C @ $5.55 

Net Debit: $5.55 ($555.00)

Profit Target (50%): $8.35 ($835.00)

Stop-Loss Point (50%): $2.75 ($275.00)

TLT  $112.51

Buy to Open (1) Jan 12 115 C @ $4.20 

Net Debit: $4.20 ($420.00)

Profit Target (50%): $6.30 ($630.00)

Stop-Loss Point (50%): $2.10 ($210.00)

SLV  $42.18

Buy to Open (1) Jan 12 43 C @ $4.35 

Net Debit: $4.35 ($435.00)

Profit Target (50%): $6.55 ($655.00)

Stop-Loss Point (50%): $2.20 ($220.00)

 

REMEMBER: “When there is a small movement in the stock, there is a magnified movement in the option”.  The “Long Call” strategy can be easily transformed into a “Bull Call Spread”, “Calendar Call Spread”, or “Diagonal Call Spread”.   

All positions displayed are for educational purposes only and are not intended to be recommendations.