great article Trading volume in ETF

Would you hesitate to make an ETF trade that was significantly larger than the average daily volume? Here’s an example of how ETF liquidity works and what really matters.

During the first quarter of 2017, 1.1 million shares of NOBL (ProShares S&P 500 Dividend Aristocrats ETF) were bought in one block trade.

nobl_tradingnobl_trading_comparedotional is notable for its This trade of $60 million notional is notable for its size and the quality of the execution. It is also a good example of some of the fundamental principles of ETF trading that are worth reviewing:

ETF volume is not an indicator of ETF liquidity

At the time of the trade, NOBL’s average 30-day volume was approximately 360,000 shares. The above-referenced trade was approximately three times the average daily volume. The ability for market makers to access the underlying liquidity of the ETF’s components, or basket, created a secondary level of liquidity that far exceeded the average daily volume of the ETF. As noted in the graph below, 1.1 million shares were sold at 11:07 am on the offer at $54.15 when only 8,400 shares were publicly offered at that price, which made no noticeable impact on the bid-ask spread.

Liquid underlying constituents means liquid ETFs

The underlying constituents of NOBL are 51 U.S. large cap equities that are equally weighted. These large cap securities are some of the most widely held U.S. equities with deep liquid markets. For the $60 million notional trade noted here, the approximate 2% weighting in NOBL yields approximately $1.2 million in notional to buy in each security. Viewed this way, the transaction is a relatively small trade across 51 securities. As result, the 1.1-million-share trade had little effect on the secondary trading of the ETF following the trade.

Accessing liquidity providers is the key to great execution

ETF liquidity providers have the unique ability to create and redeem new shares of the fund. As a result, they can look past low screen volume in an ETF to the underlying components. In addition, when the underlying components do not have the same liquidity as those in NOBL, in the case of small cap ETFs for example, a liquidity provider could use a liquid proxy hedge like small cap futures to provide immediate liquidity in the ETF and over time buy the underlying components. In either case, the liquidity provider needs only to deliver the underlying basket of securities to create new ETF shares.*

Intraday value can be a guide to execution quality

The intraday value provides a good estimate of the underlying value of the ETF compared with the trading prices of the underlying basket. The intraday value for NOBL is published by the NYSE every 15 seconds. At the time the trade was executed, the intraday value was approximately $54.1286. In other words, the trade was only $0.0214 (approximately 4 basis points) over the intraday value.

This article can be found at Proshares website here

gold and Euro – Flight to safety when Crude tanker gets attacked?

Very interesting flight to safety? Or Not? As i mentioned in the last post that i shorted EURO at 1.1291 on technical chart pattern signal and it is in my directions around 185 dollars profit (100,000 EURO lot short on my fantastic mobile app of forex.com).

But i did expect Gold to fall. Why? EURO and Gold have direct relationship. That is, if EURO falls which means dollar rises which mean Gold falls. but EURO went down and Gold went up! Because GOLD is flight to safety commodity!

as the tanker attack in persian gulf took place, people went to GOLD for ‘safe investment’

lets see what happens on purely technical chart patterns – from 31st May through 12th June EURO went up from 1.1124 to 1.1344 vis a vis to GOLD what happened to GOLD prices? GOLD went up from 1282 to 1338.

NASDAQ NQM19 is still meeting resistance at 50 days SMA. I am waiting for break above 7575 before i get in. In relation to NASDAQ composite. Let’s see on the last day of trading today in the markets – NASDAQ composite should comfortably trade above 7860. It has been an outside day yesterday which i was not expecting and is quite bullish.

GOLD man – GOLD GCQ19 is hovering near 1350 dollars. what solid moves up. very bullish on GOLD.

happy travel trading !

 

 

nasdaq is losing steam

it has been a fantastic week with nasdaq. Good trade. Got in own 6/6 at around 7100 and got out on 6/11 for about 390 points profit in NQ

EUR usd is just transitioning down. Both GOLD futures (went up 30 dollars) and EUR USD went up. Gold and USD have inverse relationship. So if EUR is going up, GOLD also goes up

I missed out on Crude – just made about 160 ticks on it… Instead of around 1000 ticks. It is a big bummer since the chart indicated that it has broken support.

NIFTY 50 in India has been very volatile and erratic. Currently i am off and in the sidelines.

Just shorted EUR at 1.12910. the charts indicates a clear change in direction. GOLD is still little bit uncertain. Waiting for the patter to emerge.

EUR is interesting now – It has gone up about 200 pips in 8 days. a steep ascent. It has aggain broken an important support of 1.1300.

Happy traveling and trading

 

and correction sets in

I am currently in Hyderabad india and started trading the indian markets, they are fun !

Pardon me for not posting regularly since i have been studying the Indian markets and have diversified in Crude Oil, Gold, and EUR USD trading.

In Indian market i have been trading the NIFTY futures.

So i will be posting the general market updates on the above instruments

Lets strat with NIFTY 50 – the spot level avg 20 day volume is about 400 million. it is a fantastic instrument to trade . Current solid resistance is 12,050. but i feel it is strongly coupled with the US market where a strong correction has set in.

Gold has just crossed a solid 5 month old resistance of 1300 and 1310.  Current trend is upward for the china trade war and now trade war with Mexico is pushing the prices up from last week. I am long on GCQ19 with a short stop loss at 1315. Last week made about 3 points on GCQ19 on friday. Gold has broken on the upside the 50 days SMA.

On Crude it was a fantastic hit and run trade – a sell stop limit of 55.64/55.63 at 50.65 and placed a buy limit order at 55.00 and it was hit with a profit of 65 ticks. Crude is down and there is no support on it at all. Crude has crashed below 200 days SMA. the only support i see is at 52.50 and then at 50.

EUR USD is directionless on a daily chart. On  weekly chart it is a fantastic downtrend and dollar index has hit a resistance a solid 6 week resistance of 98.40 and has gone just below the previous support of 97.71 (nov dec 2018)

Nasdaq and US market is in correction. i am really bummed that i did not short early and have been taking a mere 100 points on NQ but that is fine.

happy travel trading !