The convenience of use that has made ETFs such a hit with retail investors is also making their derivatives attractive, to investors both large and small. Elise Coroneos reports.
The world of exchange-traded funds has grown exponentially
since the first product, State Street’s Spider,
was launched in 1993. Today, there are over 800 products in the
US and more than 2,600 worldwide, conveying exposure to a
plethora of underlying investment themes, from equity indices
to commodity futures and currencies.
The first ETFs, like the Spider, typically enabled investors
to trade an entire index or portfolio of stocks in a single
action – making turning over one’s
portfolio as easy as selling one stock. But over the last few
years, many variations to the basic ETF and many strategies for
trading them have sprung up, many of which involve futures and
Most notably, in the US, ETF options have taken off and
continue to gain momentum. About 330 ETF options are now traded
in the US, according to the Options Clearing Corp, so that they
cover almost half of the ETFs available. In 2008, these
instruments accounted for 30.3% of all options traded in the
US, up from just 3.6% in 2000.
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