Are there disadvantages to day trading ETFs?
I bought an ETF a few months ago and I was thinking of selling it, however, I was wondering if there were disadvantages or additional fees if I treated ETFs like short term stocks.
1 Comments
Sorted by latest first Latest Oldest Best
ETFs are well suited to day trading, but you should be mindful of the bid-ask spread.
See article: Commission-free ETFs are a great way to save money, but watch the bid-ask spread too.
Bid-ask spread is largely a function of liquidity, or the volume of
buyers and sellers for an asset during a particular moment in time.
... It may be more difficult to trade certain assets that are less
liquid, where bid-ask spreads can be higher. Think some penny stocks.
If you have the choice, compare the spreads of the ETF and the target stock.
Longer-term "keep & hold" trading on ETFs tracking futures can be somewhat disadvantageous. Futures contracts roll-over every month. Exchange traders have to sell and buy in on the next contract. ETFs don't reflect the price differential between the futures contract.
See here for more detail on that: Positioning For An Oil ETF Rebound? Watch For Contango
Contango occurs when the price on a futures contract is higher than
the expected future spot price, which creates the upward sloping curve
on future commodity prices over time. Essentially, the phenomenon
reflects a current spot price that is lower than the futures price.
... While this phenomena is a normal occurrence in the futures market,
contango can have a negative effect on ETFs.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2025 All Rights reserved.