Top 2 ETFs to Trade in June 2022
Jun 10, 2022
Exchange Traded Funds (ETF) are securities that pool stocks into one tradable instrument. Usually, ETFs track an index and are comprised of the individual stocks that make up that index. However, ETFs can be structured to track anything.
The very first ETF was the SPDR S&P 500 ETF (SPY), which began trading in 1993 and tracks the S&P 500 Index.
ETFs consist of a basket of stocks, and they make for good trading vehicles because when one or a few stocks that are in the ETF have large swings in price over a short period, the overall price of the ETF is likely to move much less. This is because the price of the ETF is based on the prices of all the stocks in the ETF and will not be greatly influenced by one or a few stocks.
It is important to note that not all ETFs are as diversified as others. Some ETFs are equally weighted, buying equal amounts of each stock in the fund, while other ETFs concentrate the purchasing of stocks in the fund based on different factors. Often, these factors try to skew the concentration of the ETF toward the top performing stocks in the fund. For that reason, it may be the case that an ETF is comprised of dozens of securities yet most of the value in the fund is concentrated in just a hand full of assets.
The China Large-Cap Ishares ETF (FXI) seeks to track the FTSE China 50 Index which is composed of large-capitalization Chinese equities that trade on the Hong Kong Stock Exchange. The FXI itself trades on the New York Stock Exchange. This ETF currently has 59 total holdings.
The FXI is currently a good options trading vehicle because it has a high IV Rank of 40.8, based on the tastyworks calculation, and is heavily traded. On June 9th, 2022, it traded more than 49 million shares. At the money options in July’s expiration have a tight bid-ask spread of about $0.05. IV Rank has also remained above 30 for the majority of 2022.
This ETF allows us to trade volatility via options on a group of stocks that are based on companies that do not trade in the United States. This makes it a great addition to a portfolio because it is less correlated to US markets than other ETFs made up of US stocks. Based on Fig. 2 we see that over the last three months FXI has a 0.53 correlation to SPY. FXI is a good trading instrument for many options selling strategies.
The Vaneck Junior Gold Miners ETF (GDXJ) seeks to track the MVIS Global Junior Gold Miners Index, which attempts to track the overall performance of small-cap companies involved primarily in mining for gold and/or silver. The GDXJ trades on the New York Stock Exchange. This ETF currently has 103 total holdings.
The GDXJ is currently a good options trading vehicle because it has a high IV Rank of 43.2, based on the tastyworks calculation, and is heavily traded. On June 9th, 2022, it traded more than 7 million shares. At the money options in July’s expiration have a tight bid-ask spread of about $0.06 to $0.12. IV Rank has also remained above 25 since mid-February of 2022.
This ETF allows us to trade volatility via options on a group of stocks that are historically less correlated to the S&P 500. Based on Fig. 2 we see that over the last three months GDXJ has just a 0.24 correlation to SPY. GDXJ is a good trading instrument for many options selling strategies.
Trade these ETFs and over 8,000 stocks and options, open an account on tastyworks!
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com.
tastytrade is a trademark/servicemark owned by tastytrade.
tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).
tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.
Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.
Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.