Tuesday, July 27, 2010
Fundometry
On June 30, 2010, the SEC announced its intention to expand the circuit breaker pilot program to include, for the first time, ETFs. The volume-based criteria for selecting ETFs produces some interesting and potential trading scenarios. For example, SPY and IVV, two ETFs which track the S&P 500, are included in the proposed expansion of the circuit breaker program. If one of these two ETFs triggers a circuit breaker, will the market simply move to trade the other ETF?
Leveraged ETFs have also been excluded for now. If a broad-market ETF
triggers a circuit breaker, can traders utilize leveraged versions of the ETF to continue trading through the duration of the circuit breaker?
Aside from concerns about circuit breakers, the enclosed graphs should be useful to anyone trying to understand the behavior of the leverage ratio during different trading situations.
http://fundometry.blogspot.com/2010/07/using-leveraged-etfs-to-trade-during.html
