Marc Courtenay's  Instablog

"JPM’s profit soars 583% year over year" wrote my colleague Keith Fitz-Gerald. MS reported a net income of $757 million, compared with a $159 million net loss in the second quarter and the year-earlier profit of $7.7 billion. For common shareholders, the firm had net income of $498 million, a 38-cent-a-share profit that beat analysts' expectations by 11 cents and sent Morgan Stanley shares up earlier today.

Now here's an ETF idea a colleague mentioned to me today (not Keith) that one might want to consider very carefully. It involves the UltraShort Financial Proshares (NYSE:SKF) and Ultra Financials Proshares (NYSE:UYG).

SKF (on the short side) and UYG (on the long side) seeks daily investment results, before fees and expenses, which correspond to twice the daily performance of the Dow Jones U.S. Financials index.

The funds normally invest 80% of assets in financial instruments with economic characteristics that should be twice the return of the index (SKF short, UYG long). It may employ leveraged investment techniques in seeking its investment objective.

This is for very short-term traders who want to attempt to catch a short-term trend in the financial sector. Read and study about them carefully, know about their "holdings" (10 financial stocks make up over half the weighted value of the DJ U.S. Financials index) and realize they use derivatives like "total return swaps" to meet their objectives.

There is "counter-party risk", and like I said, these are meant for short-term, aggressive traders who think there will be volatility in the financial sector and want to capitalize on it. These kind of ETFs are not in any way like typical stock ETFs or investments.

Check out the chart of what SKF and UYG have done over the past 3 months and the second chart is the past 5 days. It is nothing short of educational.


Disclosure: I'm only long one financial stock right now, Citigroup (NYSE:C) and I haven't personally tried SKF and UYG yet, but I'm getting tempted, especially with SKF.

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