The recent report from the SEC and the Commodity Futures Trading Commission on the Flash Crash fingers an automatic sell program executed by a “Mutual Fund Complex” as the trigger of the crash. Starting at 2:32 p.m. EDT on the 6th of May this program, referred to as the “Sell Algorithm” automatically sold short 75,000 E-Mini S&P futures contracts (approx 4.1 Billion dollars worth, equivalent …
Some people have been hyperventilating about the high short interest many ETFs are showing. XRT for example recently had 95 million shares in short interest with only 17 million shares in shares outstanding. If you want a detailed response to these fearmongers I found this article to be very helpful. If all of the people that were short XRT decided that they wanted …
What if I’m short a security when it goes ex-dividend? You are on the hook for the dividend if you are short the stock/ETF when it goes ex-dividend. It will be subtracted from your brokerage account on the distribution date. You borrowed the stock, you are responsible for paying the owner of the security the dividend. More questions on dividends? See Top 10 questions about dividends.
If your devious dividend capture plan involves you hedging against SPY’s price movements by selling IVV short until after SPY goes ex-dividend you can forget about it. The IVV (Barclays Global) price doesn’t drop by SPY’s dividend amount on SPY’s ex-dividend date. It continues to track the S&P 500 until it goes ex-dividend a few days later. Your master plan will net out with you …
Update VXUP and VXDN were terminated on September 8th, 2016. They never accumulated enough assets to be financially viable. The naysayers on these funds were right—there was no way these funds could perform the way their prospectus or marketing materials suggested. They didn’t understand (and didn’t bother to learn once it was pointed out) how their funds would be arbitraged against VIX futures in such …
