The Chicago School of Trading

Trading Options on Inverse and Ultra ETFs

by DanKeegan

Originally Published in Futures Magazine

Question: How can traders take advantage of leveraged ETFs without a huge capital commitment?

Answer: Cut out the middleman and do as the indexers do, trade options on the ETFs.

Inverse and ultra exchange traded funds (ETFs) can be handy arrows to be found in a trader’s quiver. The “ultra” funds return two or three times the daily return than a normal ETF. Inverse ETFs can achieve the same goals as a straight out short position without consuming nearly as much margin.

What is an ultra ETF? It is an… [ Read more ]

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On May 6th, 2010 the stock market took its wildest twelve minute ride in history.  SPY(SPDR S&P 500 ETF, Public,  NYSE:SPY) opened at 116.26 rising as high as 117.00 before finishing the day at 112.94. Oh, I almost forgot to mention that  SPY  traded as low as 105.00 before rallying back up. That all happened within the in that now infamous twelve minute span of time. The  VIX  (CBOE: VIX)  , which tracks the implied volatility of options that are traded on the SPX, was as high as 40.71 before closing at 32.80. The very next day, with… [ Read more ]