US Small Cap Index ETFs Launched by ProShares
This week, Proshares launched six new ETF’s I’m interested in. I’ve added their symbols to my Proshares page for easy reference. The six are based on the Russell© 2000 Index, and the S&P SmallCap 600. They include:
- Ultra SmallCap 600 ProShares SAA
- Ultra Russell© 2000 ProShares UWM
- Short SmallCap 600 ProShares - SBB
- Short Russell© 2000 ProShares - RWM
- UltraShort SmallCap 600 ProShares - SDD
- UltraShort Russell© 2000 ProShares - TWM
I like these, because they’ll offer a great way to gain exposure to the small cap index world, in a diversified way. It will take a few trading days to build some liquidity, and form some trading patterns, but they’ll be on my watch list.
You can really get aggressive using the 2x, and 2x inverse the index, or average power of these ETFs. You just can’t do that trading the QQQQ.
Generally, I focus on higher priced stocks. The point moves are often greater than small cap stocks, and usually provide needed liquidity. While you can get larger percentage moves out of penny stocks, or stocks priced under $20, they’re sometimes traded so thin, a guy can get into trouble fast. Watch them drop .50 in a flash, when you’re holding a decent amount of shares. Too stressful for me.
I’m hoping these new Proshares ETF’s will allow me a piece of that pie, without gaining the extra grey hairs.
April 2nd, 2007 at 2:59 pm
A while back a colleague and I put up a web site on the Index Roll, a leveraged index investing technique using LEAPs, and wrote an article for Seeking Alpha called “Indexing on Steroids” that was carried by Yahoo Finance and many other sites. You may have read it.
We just wrote another article you may be interested in: “Leveraged ETFs: A Value Destruction Trap?” It shows the perils of a fund trying to maintain constant leverage during a bear market, which is what the Ryder and ProShares ETFs do. In order to maintain their leverage ratio, these funds buy lots of shares during a bull market, and then sell them all during a downturn, with devastating results which they just can’t recover from.
Here’s the URL:
http://etf.seekingalpha.com/article/31195
April 3rd, 2007 at 7:21 pm
Nice article Tristan. Thanks for sharing. I see how they walk a fine line with some of their tactics.
Mike