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« ProShares UltraShort Financials ETF (SKF) An Option Calls Update | Main | Baby Bush: The Worst President in History? »

ProShares UltraShort Financials ETF (SKF) An Option Calls

SKF Chart 20 August 2009.JPG

Chart courtesy of Stockcharts

Today we purchased the September 2009 series Call Options (FFWID) at a Strike price of $30.00 for $2.30 per contract on ProShares UltraShort Financials (ETF) whose symbol is SKF. This fund effectively shorts the financial sector and offers a 2:1 inverse ratio to the Financial Index on the DOW as described below.

ProShares UltraShort Financials (the Fund), formerly UltraShort Financials ProShares, seeks daily investment results that correspond to twice the inverse daily performance of the Dow Jones U.S. Financials Index (the Index). The Index measures the performance of the financial services industry of the United States equity market. Component companies include regional banks; United States-domiciled international banks; full line, life and property and casualty insurance companies; companies that invest directly or indirectly in real estate; diversified financial companies, such as Federal National Mortgage Association, credit card issuers and investment advisers; securities brokers and dealers, including investment banks, merchant banks and online brokers, and publicly traded stock exchanges. The Fund takes positions in securities and financial instruments that, in combination, should have similar daily return characteristics as –200% of the daily return of the Index.

ProShares UltraShort Financials seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Financials Index.

Taking a quick look at the above chart we can see that it is very volatile to say the least. However it reflects the dramatic rise in the fortunes of the financial sector and as an inverse fund it has taken it on the chin. Also note the yawning gap between the price and the 200dma and the technical indicators which appear to be suggesting a recover.

Now if we zoom in and have a look at the chart below we can see SKF just may have formed a bottom and the indicators have managed to climb off the floor suggesting better things to come.

SKF close up Chart 20 August 2009.JPG

Our position is that the broader markets including the financial sector will soon take a breather as profit taking becomes irresistible for the investment community.

Please do not go too mad on any of these ideas, you need to be able to sleep at night. Also try and formulate your exit strategy and once you have made a purchase then go ahead and place a sell order at a level you decide is achievable and that you are comfortable with.

ProShares UltraShort Financials (SKF) has a market capitalization of $792.45 million, with 26.66 million shares outstanding, a 52 week trading range of $29.47 to $303.82 and closed today at $29.72.

Your thoughts are of course most welcome.

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Reader Comments (6)

I've had and still have my finger on the trigger to buy, but my concern is that these are the very entities who now control and are the beneficiaries of the Fed's money supply. The $$$Trillions we've heard and spoken of are going to them. On top of that, they control the so-called watchdog entities, the SEC and CFTC, who should be called labdogs as they simply lick the hand of the mafioso bankster cartel that feeds them and puts them into those positions of authority, where they proceed to do NOTHING to stop them. All of which is to say that I'm concerned that I might be trying to beat the casino at their own rigged tables. Have to admit, the price is very tempting...jt

August 20, 2009 | Unregistered Commenterjt

I had the thought to buy SKF when it was at 80 several months back and again at 40 a few weeks back. I just could not determine where to get in - 80, 40, 30 or 20 or ... Now looks like a great time to SKF, but I thought the same thisn at 40.

What analysis did you do to determine that now at 30.00 was a good entry point? I would like to better understand the dynamics involved.

August 20, 2009 | Unregistered CommenterBC

I got a hit today, so I looked for an exit. However, I checked out the charts of some banks and found that a possible double top is forming, so SKF might retreat to the 27U$ level because of this second top. This would be an entry point if the double top works, and if the financials selling ever happens afterwards. Check for yourself, Invesco (IVC), HSBC (HBC), BoA (BAK) and USB are all recovering and (maybe)pronting a double top. Besides some of them are reaching overbought by looking at the On balance volume. But the risks are that they might perform better than this and cut us off. So I´ll try to sell SKF and wait to see if am right. The value promise of that move that I can foresee is 88U$ per share, restoring SKF to its last downbreak trend on april 08. Wish me luck!

August 20, 2009 | Unregistered CommenterToni

All of the above points are good ones and we note them. We first thought of BAC when considering this type of trade as it appeared to be overbought, however if it is the 'chosen one' to be propped up no matter what, then turning our attention to SKF appeared to be the logical thing to do.

All eyes are focused on China at the moment in the hope that they can become the new consumers so as their markets move up and down so the rest follow.

We still think that a correction is on the cards for the broader markets and for the financial sector in particular, although we may be into it a tad too early.

August 20, 2009 | Unregistered CommenterGold Prices

On a fundamental basis, I agree with Toni that it is a bit too early to enter since BAC is going up, and Citicorp (C) is going up, and the broad market is going up. Technically, 30 is only 2/28 = 1/14 = 7% above the bottom, and looking at the fundamentals which conflict significantly with the technicals in outlook, it appears it is too early to call this a true bottom.

August 20, 2009 | Unregistered Commenterkenneth

Labaton Sucharow LLP Files Class Action Lawsuit Against ProShares' UltraShort Financials ProShares Fund -- SKF
NEW YORK, Aug 21, 2009 (GlobeNewswire via COMTEX News Network) -- Labaton Sucharow LLP filed a class action lawsuit on August 20, 2009 in the United States District Court for the Southern District of New York on behalf of all persons who purchased or otherwise acquired shares in the UltraShort Financials ProShares fund (the "SKF Fund") (NYSE:SKF), an exchange-traded fund ("ETF") offered by ProShares Trust ("ProShares"), pursuant or traceable to ProShares' false and misleading Registration Statement, Prospectuses, and Statements of Additional Information (collectively, the "Registration Statement") issued in connection with the SKF Fund's shares (the "Class"). The Class is seeking to pursue remedies under Sections 11 and 15 of the Securities Act of 1933 (the "Securities Act").
The SKF Fund seeks investment results that correspond to twice the inverse (-200%) daily performance of the Dow Jones U.S. Financials Index ("DJFIX"), which measures the performance of the financial services industry of the U.S. equity market. Accordingly, the SKF Fund is supposed to deliver double the inverse return of the DJFIX, which fell approximately 51.03 percent from January 2, 2008 through December 17, 2008, ostensibly creating a sizable profit for investors who anticipated a decline in the U.S. financial services industry. In other words, the SKF Fund should have appreciated by 102.06 percent during this period. However, the SKF Fund only appreciated by approximately 1.06 percent during this period -- hardly a directional play.

This is an exerpt from:This news release was distributed by GlobeNewswire,

August 21, 2009 | Unregistered CommenterToni

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