This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Two Anti-Euro ETF Plays

Stocks in this article: EFA EZU GXF

NEW YORK ( TheStreet) -- When explaining the impressive rise of the ETF industry, most are quick to note the major cost differentials and potential tax efficiencies as the primary advantages of exchange-traded products over traditional actively-managed mutual funds. While these factors have certainly been instrumental in growing ETF assets in recent years, there are some other distinguishing aspects of ETFs that make them more appealing than mutual funds to more active investors.

ETFs trade like stocks, which to most means that they can be bought and sold throughout the day at a price determined on the open market, instead of at the end of the session at net asset value. But it also means that they can be sold short, thereby significantly increasing the depth and complexity of trading strategies available to ETF investors (see Five Advantages Of ETFs Over Mutual Funds ).

Lingering concerns about the stability of Europe and fresh worries about a conflict in Korea have hammered equity markets over the last month, as virtually every corner of the globe and every sector has tumbled. But that doesn't mean that every investor has lost his shirt over the last four weeks; many who bet on a downward correction have turned a nice profit as asset prices have crumbled. Investors who amplified short exposure through leveraged ETFs have made a killing thanks to the recent wave of risk aversion (see Three Leveraged ETFs Up 50% During The Correction ).

Short selling and leveraged ETF investing are, of course, for those investors with an above average appetite for risk. But there are ETF plays all along the risk tolerance spectrum that can be useful in a bearish environment. In recent weeks, we outlined two market neutral ETF trades designed to profit from weakness in the eurozone relative to the rest of the region:

  • 1. Long HEDJ, Short EFA
  • 2. Long GXF, Short EZU
  • An argument can be made that such a market neutral strategy is even more risky than a simple short strategy; if the long asset deteriorates while the short asset soars, losses can be amplified. But because the ETFs in these trades tend to be highly correlated, such a scenario is rather unlikely. In the following pages, we take a look at how each of these strategies have performed in recent weeks (specifically, since the S&P 500 touched its 2010 high on April 23).

    1 of 3

    Select the service that is right for you!

    Action Alerts PLUS
    Try it NOW

    Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    • Weekly roundups
    TheStreet Quant Ratings
    Try it NOW
    Only $49.95/yr

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    • Upgrade/downgrade alerts
    Stocks Under $10
    Try it NOW

    David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    • Weekly roundups
    Dividend Stock Advisor
    Try it NOW

    Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Alerts when market news affect the portfolio
    • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
    Real Money Pro
    Try it NOW

    All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

    Product Features:
    • Real Money + Doug Kass Plus 15 more Wall Street Pros
    • Intraday commentary & news
    • Ultra-actionable trading ideas
    Options Profits
    Try it NOW

    Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

    Product Features:
    • 100+ monthly options trading ideas
    • Actionable options commentary & news
    • Real-time trading community
    • Options TV
    To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
    Submit an article to us!


    DOW 18,030.21 +6.04 0.03%
    S&P 500 2,081.88 -0.29 -0.01%
    NASDAQ 4,773.4720 +8.0480 0.17%

    Brokerage Partners

    Rates from

    • Mortgage
    • Credit Cards
    • Auto

    Free Newsletters from TheStreet

    My Subscriptions:

    After the Bell

    Before the Bell

    Booyah! Newsletter

    Midday Bell

    TheStreet Top 10 Stories

    Winners & Losers

    Register for Newsletters
    Top Rated Stocks Top Rated Funds Top Rated ETFs