I want to write my first post in the new year as a small recapitulation and a look back to the last year from the ETF point of view, and especially – and as you can probably guess – to those that did badly last year. Paradoxically, those are the most interesting for us.
First, I’ll focus on those ETFs that do not use leverage.
Perhaps no one will be surprised that the list of the most losing ETFs is dominated by those that are linked to the volatility, respectively to the VIX volatility index. If I have mentioned in the previous articles that the level 10 can be taken as an imaginary support line, I take my claim back :)). VIX reached its historic low this year when it dropped to 8.56 in November.
If we skip volatility, the development of natural gas is also interesting, which I have already pointed out in this article. Gas prices have fallen by about 30%, but ETF/ETN like GAZ or UNG have seen even more significant declines. The effect of the contango or in other words – the futures contract expenses of the roll-overs have been fully demonstrated here.
Figure 1: Rank of the 10 most loosing ETFs for the year 2017 (source: etfdb.com)
When we add the leverage …
The list does not change much with leveraged ETFs, again dominated by funds based on volatility, which are followed by natural gas. Worth mentioning are the leveraged ETF linked to a particular sector (biotech, mining) or country/region (China, emerging markets, …). For comparison purposes, non-leveraged ETFs are bold in italics.
Figure 2: Rank 20 of the most losing ETFs for 2017, including leveraged ETFs (source: etfdb.com)
Despite the fact that the losses of these ETFs are enormous and that the ETFs mentioned above could be considered as suitable candidates for trade – long-term short, not all of them meet the criteria for trading strategies I will introduce to you in other parts of this series. As you might think, it is necessary for a specific title to meet a number of other liquidity requirements (expressed for example by the daily number of transactions), sufficient AUM (assets under management), whether the options are available, etc.
The final selection of suitable candidates for short-term trades is quite decreased.
Let me finally end up with a wish to a New Year – as first, I wish you a lot of health, good luck and many successes in both private and professional life.
It will be undoubtedly an interesting and maybe even a little breakthrough year, we will celebrate the 10th anniversary of the financial crisis, with stock markets at historical highs. Few admit that such a ride should be over, and that evokes me only one thing – alertness.
Rather than looking at what could cause a correction on the market, it makes much more sense to think about how to protect ourselves against possible collapse and possibly use it to our advantage. Fortunately, the market has a vast options and tools that, when used properly, make it possible to derive an interesting yield from a potential opportunity with a limited risk level.
I will make my best to bring you the continuing of my series here on the Quastic, to show you the approaches and investment strategies that we are also using in the Charles Bridge Fund and which are also interesting for a more volatile period.
As a trader, I wish you a lot of exciting trading opportunities, lot of patience, a little greed in the new year, and always keep in mind that the only thing we can control on the market is the risk.