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Dave Nadig
3:29
OK, one or two more questions here.
TickerTrader
3:29
I'm a very active trader.  Is there something that makes one ETF better for day trading than another?  Is there something I should be looking out for?
Dave Nadig
3:30
Well, the sort of obvious answer is simply "tradability" -- we covered this a bit int he webinar.  If you're day trading, obviously you care a lot about spreads and volume.
And you care a lot less about annual expense ratio.
3:31
One thing I think I'd be cautious of.  I've talked to traders who get very ticker blind.
they see "a thing" move and have a certain chart pattern and they get all excited.
an example is things like leveraged products.
I've seen blog posts about chart patterns in leveraged products and that really makes me scratch my head.
3:32
ETFs are derivatively priced.  Nobody is "pushing" the price of a 3X S&P fund up or down -- the fund is just responding to what's happening in the S&P 500, which itself is just derivatively priced from the underlying stocks.
3:33
So if you want to daytrade something, have at it, but I'd just understand that the drivers are going to be very different than, say, the drivers of a frothy day in your favorite midcap stock.
Tina
3:33
ETFs seem to have been a large part of the market correction earlier this year. Can they cause a larger issue than MFs?
Dave Nadig
3:33
OOf, well, that's a big question, so I think I'll wrap with this one.
3:34
So, first off, ETFs are roughly 1/3 of the value traded on the U.S. exchanges on any big volume day, so it's inconceivable that ETFs wont be part of the story when the market goes up or down a few percent in a hurry.
But it's worth asking two questions.
3:35
1: is there anything in the ETF structure itself that contributed to whatever event.
2: Did ETFs function as designed during whatever event.
3:36
the second question, has pretty much been always been a resounding yes.  We've had a few trading events where we've had anomalous prices, but those were really market structure issues, not ETF issues.
On the first question, I guess I remain unconvinced.  Even going back to the 2010 flash crash, it's clear to me that ETFs got wagged, not the other way around.
3:37
I don't mean to sound like an apologist - but ETFs are just another place investors can express opinions.  THey happen to be very liquid and efficient at it.
So if (for example) everyone wants out of Muni Bonds NOW, well, the ETF will show that very fast.
20 years ago, there was no fast way for the market to express that opinion.
So ETFs have compressed time, really.
3:38
As for mutual funds?  The bigger issue to me is how they get hurt in a crisis.  Witness third avenue mutual funds shuttering their junk bond funds.
the ETF structures basically rode that era out perfectly, but TAMF investors got really hurt, because they had no clean creation/redemption outlet to unload securities and thus be part of price discovery.
3:39
OK folks, that's going to wrap it for today.  As always, a transcript will be up shortly.  Also we'll have a replay of our ETF 101 webinar up in the next few days as well.
We'll do this again, same time next week.
(the Live chat, not the webinar!)
Have a great afternoon.
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