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ETF derivatives: any risk you like in a bitesize chunk
18 December 2009
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 options.
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...
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