ETF Volumes Dive More Than Market

August 06, 2013




I love this ETF. I really do. The Brent/WTI spread has been one of the most consistently interesting stories in commodities for the past few years, and BNO came to market just in time for investors to really make calls on contango and backwardation on the global stage.

And that’s why BNO will consistently have trading volume of 100,000 share days. But, at times like this—when all the speculators are in their caves—BNO becomes extraordinarily tricky to trade. Not impossible; just fraught with peril and opportunities to get hosed by smarter traders than you.

The moral of the story here is simple: Don’t assume that “quiet” markets make for easy ETF trading.

ETFs are easiest to trade, consistently, when the market is frothy and full of speculators. That speculation keeps spreads tight, keeps ETFs trading closer to fair values and makes midlevel blocks much easier to trade.

Times like these—the dead zones—are actually the most dangerous.

At the time this article was written, the author owned a tiny, ill-considered and underwater position in HYMB. Contact Dave Nadig at [email protected].

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