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Be Careful with ETF's - Mike Swanson (03/31/09)

Submitted by Mike Swanson on Tue, 2009-03-31 11:29.

Hey last year I made a killing using the ultra short S&P 500 ETF.
Symbol is SDS. It was my only position last Fall during the
stock market crash and helped me make around 50% for the year.

Was awesome, and a lot of people like to use ETF's or are interested
in using them.

I think they are great trading tools, but you have to be very
careful with the ultra ETF's. If you hold them for a long time
you can lose money even if you are right about the direction
of the market!

Take a look at SDS for example. Even though the market made a new
low a few weeks ago SDS did not go through its high of last year.

All of the other ultra ETF's seem to be trading weird too, but
this is actually how they are designed to trade.

I found a great article that breaks this down for you. If you
trade or are getting into ETF's you MUST read this article:

http://news.morningstar.com/articlenet/article.aspx?id=271892

-Mike

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Hello. My name is Mike Swanson. I’m the best-selling author of the book Strategic Stock Trading. In a former life I used to run a hedge fund from 2003 to 2006 that generated a return of over 78% during that time frame. In fact it was ranked in the top 35 out of 5,000 hedge funds in 2005.

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