Short & Ultra ETFs, Should they still be traded?

Several of the systems use short & Ultrashort ETFs like QID, MZZ etc as their trading vehicles. Since the ETF funds will no longer be able to short many of the stocks that constitute the index, they cannot short the basket that represent the index underlying that ETF. Which means the bid and ask price of the ETF may not represent the real price.

Is my reading of this situation correct? Should we (the systems) continue to use these short funds as their vehicles?

J U,

The short ban is scheduled to expire Oct. 2, 2008. There is however an option to extend this for an additional 30 days.

In other words, this will be temporal.




Profunds and Rydex use futures to go long and short. Might be a nice alternative…

Underlying the proshares are equity option swap contracts as well as futures. To the best of my knowledge you can still short futures, so I don’t think the profunds will be affected.

If some bright spark creates an etf that mirrors the broad market but without financials, then it would be possible to be long that, short the broad market and voila you are effectively short the financials.


The Nasdaq 100 index does not include financials and can be shorted through the ultrashort etf trading as QID.