ProShares ETFs: As Volume Soars, Which Are the New Leaders?

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Includes: QID-OLD, QLD, SDS, SKF, SSO, UCD, UCO, UGL, UYG
by: Trade Radar Operator

Last summer (June 2008) I wrote a post titled "ProShares ETFs - Why trading volume makes a difference."

Since then, there have been two situations that suggest it might be a good time to look at trading volume again: ProShares has created a half-dozen new ETFs that weren't in our previous analysis, and market conditions have taken a further turn for the worse with the S&P 500, for example, going from roughly 1325 to under 800.

Below we present a table contrasting average daily volume in the year leading up to June 25, 2008 with average daily volume in the eight months since June 25, 2008. It is sorted in descending order based on the latest volume numbers.

Symbol Name Avg Daily Volume prior to 6-25-08 Avg Daily Volume since 6-25-08
UYG Ultra Financials 3,778,258 112,176,547
SSO Ultra S&P500 2,368,347 56,212,929
SDS UltraShort S&P500 10,640,286 43,730,513
QID UltraShort QQQ 20,042,465 38,670,681
QLD Ultra QQQ 4,171,179 31,438,395
SKF UltraShort Financials 3,778,876 30,151,740
DUG UltraShort Oil & Gas 3,703,700 20,425,378
DIG Ultra Oil & Gas 162,924 13,143,336
DDM Ultra Dow30 528,774 12,160,807
DXD UltraShort Dow30 2,454,753 11,606,795
SRS UltraShort Real Estate 892,856 11,143,286
URE Ultra Real Estate 81,689 9,003,131
TWM UltraShort Russell2000 4,337,620 7,580,650
UCO Ultra DJ-AIG Crude Oil 7,238,102
UWM Ultra Russell2000 475,894 4,743,293
UYM Ultra Basic Materials 27,550 4,714,658
SMN UltraShort Basic Materials 390,431 3,192,335
FXP UltraShort FTSE/Xinhua China 25 2,260,873 2,635,880
EEV UltraShort MSCI Emerging Markets 563,881 2,516,679
TBT UltraShort Lehman 20+ Year Treasury 156,322 1,953,684
SH Short S&P500 174,924 1,137,686
MZZ UltraShort MidCap400 451,919 1,064,628
MVV Ultra MidCap400 123,451 1,059,239
DOG Short Dow30 157,933 776,583
USD Ultra Semiconductors 65,585 389,699
PSQ Short QQQ 100,591 316,107
EFU UltraShort MSCI EAFE 104,662 276,254
ROM Ultra Technology 52,511 253,786
UGL Ultra Gold 213,400
RWM Short Russell2000 43,922 198,642
SCC UltraShort Consumer Services 27,736 149,963
REW UltraShort Technology 37,704 139,168
SAA Ultra SmallCap600 14,532 112,946
PST UltraShort Lehman 7-10 Year Treasury 40,535 104,673
SSG UltraShort Semiconductors 24,423 90,478
SDD UltraShort SmallCap600 60,777 87,470
SIJ UltraShort Industrials 17,818 71,930
AGQ Ultra Silver 69,143
UKK Ultra Russell2000 Growth 11,173 62,808
RXL Ultra Health Care 6,507 54,273
UVT Ultra Russell2000 Value 7,349 51,201
EUM Short MSCI Emerging Markets 33,837 48,629
MYY Short MidCap400 64,646 47,522
UVG Ultra Russell1000 Value 4,665 46,306
SDP UltraShort Utilities 28,313 44,947
SZK UltraShort Consumer Goods 13,972 43,940
SKK UltraShort Russell2000 Growth 39,434 41,554
UPW Ultra Utilities 10,043 41,375
SJH UltraShort Russell2000 Value 40,356 40,062
EFZ Short MSCI EAFE 12,423 39,222
UKF Ultra Russell1000 Growth 17,312 37,990
UXI Ultra Industrials 6,775 36,765
UKW Ultra Russell MidCap Growth 6,863 32,999
SFK UltraShort Russell1000 Growth 8,403 27,882
EWV UltraShort MSCI Japan 24,811 26,478
SDK UltraShort Russell MidCap Growth 9,104 24,653
UVU Ultra Russell MidCap Value 3,433 21,522
UCC Ultra Consumer Services 4,264 21,220
SJF UltraShort Russell1000 Value 6,667 19,651
UCD Ultra DJ-AIG Commodities 16,787
UGE Ultra Consumer Goods 4,853 15,250
YCL Ultra Yen 14,143
SBB Short SmallCap600 7,392 13,601
ULE Ultra Euro 12,610
LTL Ultra Telecommunications 1,596 9,038
SJL UltraShort Russell MidCap Value 7,639 7,957
RXD UltraShort Health Care 4,822 6,953

The first thing that jumps out is that acceptance of these ETFs has really skyrocketed. For the more popular ETFs, average daily trading volume is up orders of magnitude higher compared to last summer.

Look who's on top of the list: Ultra Financials (NYSEARCA:UYG). Wow, people have been trading the heck out of this ETF! Its UltraShort equivalent (NYSEARCA:SKF) has only half the volume though it seems to get twice the publicity. With volume in the bullish ETF double the volume in the bearish ETF, should we assume the bottom for financial stocks has been reached?

The UltraShort QQQ (NYSEARCA:QID-OLD) was by far the ETF with the highest average daily volume in our last survey. This ETF has now dropped to fourth place and its bullish Ultra counterpart, SDS, has become popular enough to boast volume nearly as high as QID.

Some of the new ETFs have also made a big splash. The Ultra DJ-AIG Crude Oil ETF (NYSEARCA:UCO) didn't even exist last summer but is now trading over 7M shares per day. And this is despite the fact that oil is clearly not in a bull market at the moment. Interestingly, the Ultra DJ-AIG Commodities ETF (NYSEARCA:UCD), which is comprised of up to 15% of oil futures, is pretty much being neglected, trading less than 17,000 shares a day. Also in the commodities sector and a new entry since our first post, the Ultra Gold ETF (NYSEARCA:UGL) is now trading a respectable 200,000 shares per day.

I am also struck by the fact that there is so much volume for the Ultra (bullish) ETFs in the top half of our list. With so much doom and gloom hanging over the markets since last summer, I had expected to see the UltraShort (bearish) ETFs become the volume leaders. In some cases, the opposite occurred as we pointed out when discussing UYG and SKF above. In many cases, however, volume is running more or less even between the Ultra and UltraShort ETFs.

In our last post, we made a few generic points about these ETFs and the impacts of trading volume: that higher volume generally leads to narrower bid/ask spreads, higher volume often results in tracking of the underlying index more closely and that higher volume can allow fees to be spread across more shares thus reducing expenses for individual holders. All these still hold true. Back then, I suggested investors should limit themselves to the top third of the list. As volume has grown, though, it now appears that the entire top half of the list looks pretty safe to trade.