Exchange traded funds are getting more attention from investors following reports that ETF trading volume spiked last month. Leveraged ETFs in particular have drawn scrutiny, although claims they have boosted market volatility don’t hold water.
Average daily trading volume in ETFs vaulted 83% in August from the previous month to 2.24 billon shares, reports Inyoung Hwang for Bloomberg.
The increased market volatility has investors searching for opportunities to trade and hedge with ETFs. The spike in volume was the biggest monthly increase since January 2008.
SPDR S&P 500 Trust (NYSEArca: SPY) saw trading volume more than double in August to 394 million trades a day, according to the Bloomberg report. [ETF Trading Volume Doubled in August: Report]
“People didn’t care what stocks they owned,” said James Dailey of Team Financial Asset Management. “They weren’t picking stocks, but saying, ‘I want out of stocks, I’m shorting stocks or hedging,’ and they were doing it through ETFs.”
He added investors turned to ETFs for liquidity and a more efficient way to make bearish wagers. “That’s why you saw the explosion in inverse and leveraged ETFs,” Daily told Bloomberg.
Leveraged ETFs have taken heat recently amid allegations they added to stock market volatility in August, but Wall Street industry analysts say the claims are overblown. [Don’t Blame Leveraged ETFs]
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.