An eventful week came to a close on a down note Friday. After a nearly $1 trillion rescue package formed in conjunction with the ECB, the IMF, and several European countries sent markets rallying, investors took a second look at the systemic risks of the region and pulled back sharply on Friday. The Dow shed much of its 400 point gain following the announcement on Monday, closing at 10,620.16 for the week. The euro fell below $1.24 (an 18-month low), and risk contagion over Europe’s financial troubles largely offset promising U.S. economic data. Financials in both the US and Europe were hit hard, as the market looks to find a bottom.
Below, we highlight some of the best ETF stories from around the Web:
Vanguard Joins the Commission-Free ETF Ranks at Morningstar
Last Monday, Vanguard joined the growing trend of ETF providers offering commission-free ETFs. In this article, Paul Justice examines the various free trading options ETF investors. He notes that all-in, investors are able to realize a cost advantage through Vanguard compared to the 25 offerings by iShares and eight from Schwab. The iShares products do, however, offer some potential liquidity advantages. Schwab has a smaller portfolio of free ETF offerings, but their all-in costs coupled with a strong execution platform have allowed Schwab to grow to $1.2 billion in assets. For investors who make regular contributions or are exploring new investment opportunities, these funds represent an enticing vehicle to create and maintain a well-diversified portfolio while greatly minimizing the costs incurred.
3 Ways to Ride the Volatility Wave at ETF Guide
As evidenced by the events that unfolded last Thursday, equity markets–even after a relatively strong rally–are still vulnerable to massive surges in volatility. ETF Guide outlines three different ways investors can play this volatility, whether they maintain a bear or bull outlook on the market’s movements. A less invested strategy involves selling puts (a bearish strategy) and calls (a bullish strategy). When volatility is high, the correlating premiums collected from these unexercised options contracts allow for attractive cash flows. Leveraged ETFs–such as the ProShares UltraShort S&P 500 ETF (SDS) and the Direxion Daily Large Cap Bull 3x Shares (BDU)–magnify the losses and gains of large cap stock portfolios, respectively. The VIX, which represents the volatility and thus inversely the risk appetite of investors over the next 30 days, can be played through the the iPath S&P 500 VIX Short-Term Futures ETN (VXX).
Five Reasons USO Could Be Ready To Soar at ETF Database
The United States Crude Oil Fund (USO) lost 11% in the past month due to reports of excess reserves coupled with a strengthening dollar. In this article, we lay out a number of reasons why the fund may be poised for a comeback. Recent reports from OPEC expect oil demand to grow faster than previously projected in 2010, with China being the major driver for this upward revision. The cartel said it expects consumption to grow by about 950,000 barrels a day (50,000 higher than last month’s projection), due in part to the significant growth rates observed by developing countries such as Malaysia, Singapore, Brazil, and India. The EIA also supports OPECs updated price forecasts, expecting crude prices to rise to $87 in the fourth quarter of 2011. Adding the ever-present geopolitical and natural disaster risks to the equation, we form a compelling case for oil prices and thus the performance of USO (which invests in front-month oil futures contracts) being pushed higher in the near future.
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Disclosure: No positions at time of writing.