Tuesday, November 19, 2013
Tuesday, November 12, 2013
Monday, November 11, 2013
Tuesday, November 5, 2013
Friday, September 27, 2013
Thursday, September 26, 2013
Tuesday, May 21, 2013
Friday, May 10, 2013
Thursday, May 9, 2013
Tuesday, April 30, 2013
Wednesday, April 24, 2013
Floating Rate ETF | ETF Trends
Floating Rate ETF | ETF Trends
ETFs that focus on floating rate notes and senior bank loans have been gathering a lot of cash lately as fixed-income investors position for rising interest rates and inflation.
For example, iShares Floating Rate Note ETF (NYSEArca: FLOT) has more than tripled in size since the beginning of the year to $1.4 billion in assets.
On Monday alone, the BlackRock ETF had large inflows reaching nearly $500 million, according to WallachBeth Capital. The floating rate note fund ranks second on the list of best-selling ETFs the past week.
Similarly, PowerShares Senior Loan Portfolio (NYSEArca: BKLN) has been extremely popular so far in 2013 as investors look for bond ETFs that provide protection from rising interest rates.
BKLN has experienced net inflows of $1.7 billion year to date, according to IndexUniverse data, taking total assets to $3.2 billion.
BKLN is designed for investors “who may be looking for floating-rate bonds to protect against rising interest rates,” Morningstar analyst Timothy Strauts writes in a report on the ETF. “Most investors’ portfolios are dominated by fixed-rate bonds. The biggest risk that fixed-rate securities face (aside from default) is the potential for rising interest rates. An easy way to minimize this risk is to diversify a bond portfolio by adding exposure to floating-rate securities.”
BKLN has a 30-day SEC yield of 3.94%.
In another sign of the category’s popularity, State Street Global Advisors and Blackstone Group have partnered on the first actively managed senior loan ETF, which launched earlier this month. [Senior Loan ETFs Yielding 6% Face New Actively Managed Rival]
“Suppressed interest rates and central bank asset purchases have seen bank loan ETFs grow in popularity, as investors look for ways to adjust with inflation,” WallachBeth said in a recent note.
FLOT and other floating rate note ETFs are different from the bank loan funds.
The key difference is that floating rate notes are typically investment grade, whereas most bank loans are rated below investment grade, explains Matt Tucker, head of fixed income strategy at iShares.
“Because of this, bank loans have the potential for higher yield, but of course this comes with greater credit and liquidity risk,” Tucker said. Investors often consider floating rate notes when they want to reduce their overall exposure to interest rate risk, but favor investment grade credit risk, he added. [iShares: Floating Rate Note ETF for Rising Rates]
FLOT has a 30-day SEC yield of 0.40%.
Other ETFs in the category include Market Vectors Investment Grade Floating Rate Bond Fund (NYSEArca: FLTR) and SPDR Barclays Capital Investment Grade Floating Rate ETF (NYSEArca: FLRN).
Floating Rate ETF Triples in Size on Rising Rate Fears
April 11th at 9:57am by John Spence
For example, iShares Floating Rate Note ETF (NYSEArca: FLOT) has more than tripled in size since the beginning of the year to $1.4 billion in assets.
On Monday alone, the BlackRock ETF had large inflows reaching nearly $500 million, according to WallachBeth Capital. The floating rate note fund ranks second on the list of best-selling ETFs the past week.
Similarly, PowerShares Senior Loan Portfolio (NYSEArca: BKLN) has been extremely popular so far in 2013 as investors look for bond ETFs that provide protection from rising interest rates.
BKLN has experienced net inflows of $1.7 billion year to date, according to IndexUniverse data, taking total assets to $3.2 billion.
BKLN is designed for investors “who may be looking for floating-rate bonds to protect against rising interest rates,” Morningstar analyst Timothy Strauts writes in a report on the ETF. “Most investors’ portfolios are dominated by fixed-rate bonds. The biggest risk that fixed-rate securities face (aside from default) is the potential for rising interest rates. An easy way to minimize this risk is to diversify a bond portfolio by adding exposure to floating-rate securities.”
BKLN has a 30-day SEC yield of 3.94%.
In another sign of the category’s popularity, State Street Global Advisors and Blackstone Group have partnered on the first actively managed senior loan ETF, which launched earlier this month. [Senior Loan ETFs Yielding 6% Face New Actively Managed Rival]
“Suppressed interest rates and central bank asset purchases have seen bank loan ETFs grow in popularity, as investors look for ways to adjust with inflation,” WallachBeth said in a recent note.
FLOT and other floating rate note ETFs are different from the bank loan funds.
The key difference is that floating rate notes are typically investment grade, whereas most bank loans are rated below investment grade, explains Matt Tucker, head of fixed income strategy at iShares.
“Because of this, bank loans have the potential for higher yield, but of course this comes with greater credit and liquidity risk,” Tucker said. Investors often consider floating rate notes when they want to reduce their overall exposure to interest rate risk, but favor investment grade credit risk, he added. [iShares: Floating Rate Note ETF for Rising Rates]
FLOT has a 30-day SEC yield of 0.40%.
Other ETFs in the category include Market Vectors Investment Grade Floating Rate Bond Fund (NYSEArca: FLTR) and SPDR Barclays Capital Investment Grade Floating Rate ETF (NYSEArca: FLRN).
CNBC Model ETF Retirement Portfolio | ETF Trends
CNBC Model ETF Retirement Portfolio | ETF Trends
In a collaboration with exchange traded fund experts, CNBC has rolled out an all-ETF diversified portfolio for the investor looking to save toward retirement.
“We wanted investors to have some exposure to most asset classes, that would be stocks, bonds, cash, commodities and even real estate, depending upon your age,” Kim Arther, founding partner of Main Management LLC, said on CNBC. “And you can do all of this with ETFs that are liquid, transparent and diversified.”
I am proud to be part of this advisory board put together by CNBC. [CNBC Rolls Out Model ETF Retirement Portfolios]
On Wednesday, Arthur described a suitable portfolio for a 30-year-old investor that leans toward stocks.
Younger investors will want more exposure to stocks since the asset “grows and ages along with you,” CNBC reporter Bob Pisani explained in the interview.
Specifically, the ETF portfolio for an individual who is 30 years old, with more than 30 years until retirement, includes core stock and bond holdings, along with opportunity picks that could pop up.
Equity
Looking at the equities exposure, ECON provides an interesting play on the emerging market consumer sector.
“You have the consumer exploding in the emerging markets,” Arthur explained. “So we want to make sure we own companies that give you direct exposure to those emerging markets.”
Bonds
CNBC’s Model ETF Retirement Portfolio for the 30-Year-Old Investor
April 17th at 5:30pm by Tom Lydon
“We wanted investors to have some exposure to most asset classes, that would be stocks, bonds, cash, commodities and even real estate, depending upon your age,” Kim Arther, founding partner of Main Management LLC, said on CNBC. “And you can do all of this with ETFs that are liquid, transparent and diversified.”
I am proud to be part of this advisory board put together by CNBC. [CNBC Rolls Out Model ETF Retirement Portfolios]
On Wednesday, Arthur described a suitable portfolio for a 30-year-old investor that leans toward stocks.
Younger investors will want more exposure to stocks since the asset “grows and ages along with you,” CNBC reporter Bob Pisani explained in the interview.
Specifically, the ETF portfolio for an individual who is 30 years old, with more than 30 years until retirement, includes core stock and bond holdings, along with opportunity picks that could pop up.
Equity
- SPDR S&P 500 (NYSEArca: SPY) 17.5%
- Schwab U.S. Dividend Equity (NYSEArca: SCHD) 7.5%
- Vanguard Mid Cap (NYSEArca: VO) 5%
- First Trust Health Care AlphaDEX (NYSEArca: FXH) 5%
- Vanguard FTSE All-World ex-US (NYSEArca: VEU) 17.5%
- WisdomTree Emerging Markets Equity Income (NYSEArca: DEM) 5%
- EGShares Emerging Markets Consumer Titans (NYSEArca: ECON) 7.5%
- PowerShares S&P International Low Volatility (NYSEArca: IDLV) 5%
Looking at the equities exposure, ECON provides an interesting play on the emerging market consumer sector.
“You have the consumer exploding in the emerging markets,” Arthur explained. “So we want to make sure we own companies that give you direct exposure to those emerging markets.”
Bonds
- iShares Core Total U.S. Bond Market (NYSEArca: AGG) 2.5%
- WisdomTree Emerging Markets Local Debt (NYSEArca: ELD) 2.5%
CNBC ETF Retirement Portfolio -- Target 30-Year-Old
CNBC ETF Retirement Portfolio -- Target 30-Year-Old
Weighting
| Equity | % | |
| SPY | SPDR S&P 500 | 17.5 |
| SCHD | Schwab U.S. Dividend Equity | 7.5 |
| VO | Vanguard Mid Cap | 5 |
| FXH | First Trust Health Care AlphaDEX | 5 |
| VEU | Vanguard FTSE All-World ex-US | 17.5 |
| DEM | WisdomTree Emerging Markets Equity Income | 5 |
| ECON | EGShares Emerging Markets Consumer Titans | 7.5 |
| IDLV | PowerShares S&P International Low Volatility | 5 |
| Bonds | ||
| AGG | iShares Core Total U.S. Bond Market | 2.5 |
| ELD | WisdomTree Emerging Markets Local Debt | 2.5 |
| Opportunity | ||
| BKLN | PowerShares Senior Loan Portfolio | 5 |
| GDX | Market Vectors Gold Miners | 5 |
| VNQI | Vanguard Global ex-US Real Estate | 5 |
| HYLD | Peritus High Yield | 5 |
| UUP | PowerShares DB US Dollar Index Bullish | 5 |
| Total | 100 |
CNBC ETF Retirement Portfolio -- Target 50-Year-Old
CNBC ETF Retirement Portfolio -- Target 50-Year-Old
Weighting
| Cash | % | |
| GSY | Guggenheim Enhanced Short Duration Bond | 5 |
| Equity | ||
| SPY | SPDR S&P 500 | 12.5 |
| SCHD | Schwab U.S. Dividend Equity | 5 |
| VO | Vanguard Mid Cap | 5 |
| FXH | First Trust Health Care AlphaDEX | 2.5 |
| VEU | Vanguard FTSE All-World ex-US | 12.5 |
| DEM | WisdomTree Emerging Markets Equity Income | 5 |
| ECON | EGShares Emerging Markets Consumer Titans | 2.5 |
| IDLV | PowerShares S&P International Low Volatility | 5 |
| Bonds | ||
| AGG | iShares Core Total U.S. Bond Market | 10 |
| LQD | iShares iBoxx $ Investment Grade Corp Bond | 5 |
| ELD | WisdomTree Emerging Markets Local Debt | 5 |
| Opportunity | ||
| BKLN | PowerShares Senior Loan Portfolio | 5 |
| GDX | Market Vectors Gold Miners | 5 |
| VNQI | Vanguard Global ex-US Real Estate | 5 |
| HYLD | Peritus High Yield | 5 |
| UUP | PowerShares DB US Dollar Index Bullish | 5 |
| Total | 100 |
Wednesday, April 10, 2013
Monday, April 8, 2013
Monday, April 1, 2013
Friday, March 29, 2013
Wednesday, March 27, 2013
Wednesday, March 20, 2013
Thursday, March 14, 2013
Wednesday, February 6, 2013
Discovery of multi-spread portfolio strategies for weakly-cointegrated instruments using boosting-based optimization
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&cad=rja&ved=0CHQQFjAH&url=http%3A%2F%2Fwww.atlantis-press.com%2Fphp%2Fdownload_paper.php%3Fid%3D174&ei=9-ISUfqVD5Pa9ATkl4D4Aw&usg=AFQjCNG1JViONT4Kgv4Ud59q61zYiqXNvg&sig2=-P0bB6Pzk_V4v3xHXMHWiw&bvm=bv.42080656,d.eWU
Tuesday, February 5, 2013
Monday, February 4, 2013
Tuesday, January 29, 2013
Monday, January 28, 2013
7 Great ETFs To Build An Asset Allocation Strategy | Etfs | Minyanville's Wall Street
7 Great ETFs To Build An Asset Allocation Strategy | Etfs | Minyanville's Wall Street
My firm's favorite ETFs for building an asset
allocation strategy are fairly obvious -- we write about them all the time:
My firm's favorite ETFs for building an asset
allocation strategy are fairly obvious -- we write about them all the time:- SPDR S&P500 (US Large Cap) (NYSEARCA:SPY)
- SPDR S&P Mid-Cap (US Mid-Cap) (NYSEARCA:MDY)
- iShares Russell 2000 Index (US Small Cap) (NYSEARCA:IWM)
- iShares MSCI Emerging Markets Index (Emerging Markets) (NYSEARCA:EEM)
- iShares MSCI EAFE Index (Developed Countries) (NYSEARCA:EFA)
- iShares iBox Investment Grade Corporate Bonds (Fixed income – Investment Grade) (NYSEARCA:LQD)
- SPDR Barclays High Yield Bond (Fixed Income – High Yield) (NYSEARCA:JNK)
Tuesday, January 15, 2013
Wednesday, January 9, 2013
Friday, January 4, 2013
How To Play The Volatility Of Volatility | Options | Minyanville's Wall Street
How To Play The Volatility Of Volatility | Options | Minyanville's Wall Street
MINYANVILLE ORIGINAL The past few days surrounding the fiscal thingamajig have been difficult to trade, and nowhere is this better reflected than in the moves of volatility gauges such as the CBOE Volatility Index (^VIX) swinging wildly. To offer some context for the magnitude of the moves, here are some basic statistics:
This “volatility of volatility” was the highest since the last 2011 debt ceiling sell-off.
Note the historical or realized volatility continued to rise even as the implied volatility plunged. This is due to the fact that volatility is not direction-dependent, but rather a measure of the magnitude of a move up or down. In contrast, implied volatility, which is the expectation for future movement, tends to get bid up on market declines, hence the VIX being referred to as a “fear index.” So, as the market rallied, the premium paid for options declined. This is illustrated by the graph of historical volatility SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and the implied volatility of its options.
SPY: 3-Month Volatility Chart
Expectations of Reduced Volatility
The near-term concern was also reflected in the term structure of the VIX futures, which went into backwardation, or the front-month trading at a premium to later-dated months. For example, the VIX January futures were trading 22.50 while the February contract was 21.3 in December. The last time backwardation occurred was again during the 2011 debt ceiling in which the VIX climbed to the 45% level. The term structure has now returned to a more normalized cantango with January futures at 15.30 and the February contract at 16.60. But note, overall, the term structure is as flat as it has been in over a year with premiums running about 10% month to month. This compares to the 20-25% premiums that persisted up until the election.
For most of last year, VIX futures and its options had been overpriced as S&P historical volatility remained very subdued, hovering in the 11-14 range over the past six months. This meant that buying VIX futures or options did not provide a very good hedge against a market decline.
Implied volatility is now at a discount to historical volatility, suggesting that traders don’t expect volatility to increase much in coming months. Given the looming wrangling over the debt ceiling, I think VIX products may now represent a good buying opportunity for hedging.
Don’t Get Anchored to Market Price
My preference is to use the iPath VIX Short-Term Futures (NYSEARCA:VXX) and its options as the trading vehicle because the ETN has fewer quirks than the futures and its options, as discussed in Know Your Contract Specs: VIX Options Come With Quirks.
The VXX options saw IV spike above 100 but are now trading around 65%, which is the low end of the 52-week range. One of the advantages of using volatility as a hedging or portfolio-protection tool over buying SPY puts is that volatility has something of a floor as it rarely goes below 10 and certainly can’t go to zero. This means that the VXX calls you buy (remember, volatility tends to increase as price declines) will not move too far out of the money even if the market rallies.
For example, with the VXX now trading around $28.80, one could buy the February $30 calls for $1.70 a contract. With the SPY trading around $146, you could buy the February $144 puts for $1.80 a contract. If the SPY were to rally 3% to $150 over the next two weeks, the SPY puts would now be $6 out of the money and worth approximately $0.90 contract. But the VXX will likely only decline 1.5%, meaning that the $30 calls would be worth about $1.50 a contract. More importantly is that now, even if a decline comes from a higher level, implied volatility will get a pop while the SPY puts, which are anchored to a further out-of-the-money strike, will require a very large decline to have a commensurate increase in value.
MINYANVILLE ORIGINAL The past few days surrounding the fiscal thingamajig have been difficult to trade
, and nowhere is this better reflected than in the moves of volatility gauges such as the CBOE Volatility Index (^VIX) swinging wildly. To offer some context for the magnitude of the moves, here are some basic statistics:- The VIX climbed from 15.50 to 22.75 in the six trading sessions leading up to last Friday, Dec. 28, 2012.
- The VIX has now plummeted to 14.40 in the past three trading sessions, including two consecutive days of 15%+ declines -- the first time that has occurred since the 1987 stock crash. And note that the retreat in implied volatility (IV) following the crash came from far higher levels in excess of 100.
- The VIX went from being 25% above its 10-day moving average last Friday to 15% below on Thursday. Both represent relative extremes and suggest there will be a reversion in coming days.
- The 10-day realized volatility of the VIX jumped to 140 while implied volatility of VIX options popped to 110%. The chart below illustrates the realized and implied volatility of the VIX and its options.
This “volatility of volatility” was the highest since the last 2011 debt ceiling sell-off.
Note the historical or realized volatility continued to rise even as the implied volatility plunged. This is due to the fact that volatility is not direction-dependent, but rather a measure of the magnitude of a move up or down. In contrast, implied volatility, which is the expectation for future movement, tends to get bid up on market declines, hence the VIX being referred to as a “fear index.” So, as the market rallied, the premium paid for options declined. This is illustrated by the graph of historical volatility SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and the implied volatility of its options.
SPY: 3-Month Volatility Chart
Expectations of Reduced Volatility
The near-term concern was also reflected in the term structure of the VIX futures, which went into backwardation, or the front-month trading
at a premium to later-dated months. For example, the VIX January futures were trading 22.50 while the February contract was 21.3 in December. The last time backwardation occurred was again during the 2011 debt ceiling in which the VIX climbed to the 45% level. The term structure has now returned to a more normalized cantango with January futures at 15.30 and the February contract at 16.60. But note, overall, the term structure is as flat as it has been in over a year with premiums running about 10% month to month. This compares to the 20-25% premiums that persisted up until the election.For most of last year, VIX futures
and its options had been overpriced as S&P historical volatility remained very subdued, hovering in the 11-14 range over the past six months. This meant that buying VIX futures or options did not provide a very good hedge against a market decline.Implied volatility is now at a discount to historical volatility, suggesting that traders
don’t expect volatility to increase much in coming months. Given the looming wrangling over the debt ceiling, I think VIX products may now represent a good buying opportunity for hedging.Don’t Get Anchored to Market Price
My preference is to use the iPath VIX Short-Term Futures (NYSEARCA:VXX) and its options as the trading vehicle because the ETN has fewer quirks than the futures and its options, as discussed in Know Your Contract Specs: VIX Options Come With Quirks.
The VXX options saw IV spike above 100 but are now trading around 65%, which is the low end of the 52-week range. One of the advantages of using volatility as a hedging or portfolio-protection tool over buying SPY puts is that volatility has something of a floor as it rarely goes below 10 and certainly can’t go to zero. This means that the VXX calls you buy
(remember, volatility tends to increase as price declines) will not move too far out of the money even if the market rallies. For example, with the VXX now trading around $28.80, one could buy the February $30 calls for $1.70 a contract. With the SPY trading around $146, you could buy the February $144 puts for $1.80 a contract. If the SPY were to rally 3% to $150 over the next two weeks, the SPY puts would now be $6 out of the money and worth approximately $0.90 contract. But the VXX will likely only decline 1.5%, meaning that the $30 calls would be worth about $1.50 a contract. More importantly is that now, even if a decline comes from a higher level, implied volatility will get a pop while the SPY puts, which are anchored to a further out-of-the-money strike, will require a very large decline to have a commensurate increase in value.
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