New Leveraged ETFs Track Australian Dollar
July 20th 2012 at 2:02pm by Tom Lydon
Currency traders may now hedge their positions with the new ProShares leveraged and inverse Australian dollar exchange traded funds.
According to a press release, the ProShares Ultra Australian Dollar (NYSEArca: GDAY) and ProShares UltraShort Australian Dollar (NYSEArca: CROC) began trading Thursday, July 19.
GDAY tries to reflect twice, or 200%, the daily performance of the U.S. dollar price of the Australian dollar by holding AUD/US dollar futures. The ETF has an expense ratio of 0.95%.
CROC tries to reflect twice the inverse, or -200%, the daily performance of the U.S. dollar price of the Australian dollar by holding AUD/US dollar futures. The ETF has an expense ratio of 0.95%.
It should be noted that as leveraged or “geared” products, the two funds are meant to reflect their stated objective for a single trading day. Additionally, due to compounding issues, the returns over periods of more than one day may differ from the target return, and the divergences may be even more pronounced over periods of extreme volatility.
“The Australian dollar is one of the world’s most actively traded currencies,” Michael L. Sapir, Chairman and CEO of ProShare Capital Management, said in the press release. “We are pleased to offer investors additional ways to manage risk or potentially take advantage of moves in this widely followed currency market.”
Alternatively, investors may choose to go with the simple long Guggenheim CurrencyShares Australian Dollar Trust ETF (NYSEArca: FXA), which has a 0.40% expense ratio. However, FXA acts as a Trust that tracks the price of the Australian dollar through a deposit account denominated in Australian dollars. This fund does not use derivatives to achieve its target objective.
For more information on new product launches, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.