Here Go the Short ETFs

Things like this make me wonder what country I am in.

I've received many emails and yes, Ultrashort Financial (SKF) is halted and it looks like we are stuck with it until October 2nd. At which time the government can decide if the peons can trade it again. If not they can push out the short ban for 30 more days.

Which will take us to November 2nd.

Which I believe is election day.

How convenient.

Update 1: ProShares announcement. You are now free to sell at a 35% loss. I still think they'll keep the short selling ban until the election.

Update 2: Reports both SKF and SEF halted due to lack of counterparties.

Update 3: SKF resumed trading around 11:30am Friday.

Disclosure: Long Ultrashort Financial in fund; no personal position

Comments

[Alan von Al...:]

About $5 billion frozen. Not counting tens of billions frozen in options. The following comment appeared at Yves Smith's blog...

>as of 1159 pm today option market makers are not permitted to short.

>period end of story.

>no short, no put options.

>or the put options are available only by matching naturals.

>and if they go up huge in price, that means the call options must go >up in price by parity (arbitrage will guarantee that they do).

>and black scholes cannot price this because it assumes >continuously trading liquid and complete markets

>so for the time being there will be no options market in these stocks.

>anyone who doesnt understand what i just wrote is not qualified to >trade options, seriously, and i say this for your own protection.

>September 19, 2008 12:12 PM

2008 Sep 19 01:31 PM

[Vox Rationalis:]

Too bad too. I might very well have bought it today, as protection for financials I hold. Might just have to sell instead.

Thanks, Uncle Hank.

2008 Sep 19 01:31 PM

[DaveW:]

Well that's odd, about an hour or so ago (9:00a.m. Pacific Time) SKF opened back up and I was able to purchase shares at $90.49 through Fidelity. What's up w/ that?

2008 Sep 19 01:39 PM

[toomuchgas:]

Luckily I'm out of the short ETFs. This is supposed to be a free country. Not any way to treat investors many of whom are the little guys not the hedge funds. The practical result will be a diminished use of the short ETFs. How useful a hedging vehicle that you can't sell? However, I question whether the underlying stocks will be up significantly from here once the ban lifted.

2008 Sep 19 01:44 PM

[Owen:]

Utter nonsense. Wake up and smell the coffee, Trader Mark. SKF and SEF are trading as usual.

The only limitation right now is that creating new shares (by trading in Creation Units) is not allowed. No one is stuck with anything; find something else to panic about.

2008 Sep 19 01:45 PM

[Rocknbob:]

to DaveW: good buy !

2008 Sep 19 01:49 PM

[DaveW:]

Thanks rnb, also keeping an eye on FXP as it's drop is as severe as SKF, maybe can catch it in the low $80's?

2008 Sep 19 02:20 PM

[Larry House:]

November 4 is election day. There will never be an end to this craziness!!
Our country has fundamentally changed, and we never had a chance to vote on it or voice a collective opinion. How can the U.S. ever again be THE place in the world to invest? I think the mattress is looking better all the time.

2008 Sep 19 02:48 PM

[User 265710:]

Anybody dabbling in SKF calls?

2008 Sep 19 02:54 PM

[Distressed ...:]

I watched the DXD the past few days before the big run up, there was at a point 9500 67 puts open, and suddenly they were gone before they were in the money. I was hoping someone would've made $68 million on those puts. www.distressedvolatili...

2008 Sep 19 02:55 PM

[DaveW:]

Hearing rumors that SKF will be frozen on monday, re-evaluated on Oct. 4th for another 30-day extension. Any truth to that, or just one of many rumors?

p.s. don'cha just love trying swim in these social-democratic waters?

2008 Sep 19 03:02 PM

[fatcat:]

Is it just me or have the premiums and spreads gone way up in the options?

2008 Sep 19 03:26 PM

[Owen:]

Sure, Dave. In fact, come Monday, it will illegal to sell any financial stock, even if you own it. You're stuck with those until further notice.

C'mon, at least come up with rumors that sound remotely likely.


On Sep 19 03:02 PM DaveW wrote:
> Hearing rumors that SKF will be frozen on monday, re-evaluated on
> Oct. 4th for another 30-day extension. Any truth to that, or just
> one of many rumors?
>
> p.s. don'cha just love trying swim in these social-democratic waters?

2008 Sep 19 03:35 PM

[Owen:]

Of course option premiums have gone up. Now that many options writers can't use the underlying stock to hedge their position due to short selling limitations, there's far less options being written. Good luck finding a reasonably-priced Put; you'll have to wrestle it out of someone else's hands.


On Sep 19 03:26 PM fatcat wrote:

> Is it just me or have the premiums and spreads gone way up in the
> options?

2008 Sep 19 03:40 PM

[The Simple ...:]

On quad witching day, it seems the Feds decided to punish the hedge funds, who have feasted on the financials, and in the process crushed the little shorts. Pain for everyone this year.

2008 Sep 19 03:50 PM

[BJS:]

Serves them right!!

2008 Sep 19 04:06 PM

[Kelly Liebe...:]

"Macke said we become Pakistan this week, because it outlawed short-selling last June. However, since that time, the Pakistan stock market has fallen even lower."

Here we go.....

2008 Sep 20 10:59 AM

[searcher:]

All investments have always been subject to political caprice. Many of us who were unwitting and unquestioning beneficiaries of erroneous assumptions are now indignant that we must become acquainted with the consequences. Is caprice characterized by lack of forewarning or by dubious merit, or both, or other 'markers' as well?

2008 Sep 20 01:54 PM

[adan:]

re: "...You are now free to sell at a 35% loss."

i thought the feds were gonna purchase our "illiquid assets" -

:-)

2008 Sep 20 02:01 PM