Recently, New York-based asset management firm, FactorAdvisors announced the launch of the first ever family of spread exchange traded funds (ETFs) which will enable investors to simultaneously hold a long and short position in one leveraged ETF.
These new ETFs are designed to simplify spread trading and lower the transaction costs behind implementing such a strategy. Furthermore, these new ETFs are designed to rebalance daily to achieve the desired effect of maintaining dollar neutrality. The FactorShares ETFs are designed to target a daily leverage ratio of 4:1, where each dollar invested provides approximately two dollars of long futures exposure and two dollars of short futures exposure, immediately after daily rebalancing. Although these new products offer exposure to a niche market and strategy, it is important to keep in mind that these ETFs seek investment results for a single day’s performance and rebalances on a daily basis.
The initial ETFs pair up major asset classes from among the S&P 500 Index, US Treasury Bonds, Gold, Oil and the US Dollar and include the following:
- FactorShares 2X: S&P500 Bull/TBond Bear (NYSE:FSE)
- FactorShares 2X: TBond Bull/S&P500 Bear (NYSE:FSA)
- FactorShares 2X: S&P500 Bull/USD Bear (NYSE:FSU)
- FactorShares 2X: Oil Bull/S&P500 Bear (NYSE:FOL)
- FactorShares 2X: Gold Bull/S&P500 Bear (NYSE:FSG)
Written By Kevin Grewal From ETF Tutor Disclosure: No Positions
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.