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Exchange traded fund strategies

Updated on October 26, 2015

There are many Exchange traded fund strategies.

At the time I originally wrote this hub in 2009 there were only over 250 Exchange Traded Funds (ETF) available to investors. Today 2015 there are almost 2000. Wading through all of the options can seem impossible.

Exchange traded funds are becoming a very popular form of investing. Performance wise Exchange traded funds act just like index funds. Many of the techniques used with stocks can also be employed with Exchange traded funds. Just as buying a stock an Exchange traded fund can be bought and sold anytime the market is open including pre market and after hour’s market. All types of orders associated with stocks can be utilized when trading Exchange traded funds.

There are many types of Exchange traded funds. The most popular follow the major United States indexes. Some are designed to move at twice the rate of the market. As an example the proxy for the NASDAQ 100 symbol QQQ gained 2 percent on a given day, symbol QLD which is the symbol for the Ultra QQQ gained 4 percent. There are inverse shares sometimes referred to as bear funds move in the opposite direction. Proshares short symbol QID moved down 2 percent and Proshares ultra short QQQ moved down 4 percent.

There are Exchange traded funds following most of the major United States indexes. I addition some follow single countries and world geographic regions such as the PacificBasin. There are a host of funds covering commodities, fixed income investments, currencies and United States sectors.

Exchange traded funds can be profitable

At the time of writing this article there are over 250 ETF's available to investors
At the time of writing this article there are over 250 ETF's available to investors

Just a few are listed here.


The most widely utilized strategy is the use of a stop loss on the fund. This give otherwise nervous investor’s peace of mind thinking that this feature will limit their downside. As with any stop limit a gap down at the open can cause the fund to sell below the limit price. Another common employed strategy which is can be effective is the writing of covered calls on the funds. An investor will need to understand options to understand this strategy but it can be very effective in producing nice returns. An insurance put can also be purchased on Exchange traded funds totally eliminating any downside risk.

If an investor feels the price of gold is going to rise he has a lot of choices here he can purchase fund symbols GDX, GLD or IAU. In this sector there are 2times long gold funds DGP and UGL and 2 times short funds DZZ and GLL.

Exchange traded funds are available for coal, silver, steel solar energy, crude oil. Most of these are available in long, short, two and three times long and two and three times short. Many of the most popular funds are now three times short which are us

Many major United States sectors are available such as banks, biotech, broadband home construction, pharmaceuticals and more.

An investor has the freedom to assemble a portfolio to invest in nearly every aspect of the market using Exchange traded funds.

With all of these possibilities comes an increase chance for upside potential as well as downside risk.

Exchange traded funds can be traded in an IRA account.

An investor can be as conservative as he wishes to be or as speculative. Too often an investor is tempted to drift away from a good asset allocation using Exchange traded funds.


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