The Do’s And Don’ts Of Trading ETFs

The Do’s

1. Do utilize your resources. Consult your trading desk as well as the relevant capital markets desk. The majority of issuers have capital markets teams that can consult on a trade. Additionally, the majority of advisors have access to a trading desk. These desks have access to expert market makers who can access the underlying liquidity, just like the example in figure 2. 

2. Do use a limit order when trading electronically, this cannot be said enough! 

Figure 2

USFR trading_DO

The client in figure 2 was able to trade 811,192 shares or just over $20 million notional at a penny inside the offer. That is 30 times the ADV at the time of the trade! The investor worked with his or her trading desk because they knew that there was plenty of liquidity available via the underlying securities. Making a simple phone call or sending a simple email can make the world of a difference. Would you rather be the investor who spiked the graph up 11% or would you rather be the investor with flawless execution? 

The WisdomTree Capital Markets desk is always a resource in terms of ETF trading and education. Any question is valid and no order size is too small to reach out to us for a consultation. Most investors have a trading desk through their firm or custodian, and they are always a resource as well. If there is one thing to take away from this piece, it’s do use your resources and make that phone call or email—it can be the difference between seamless execution and a very costly mistake. 

1Source: U.S. Treasury Monthly Statement, as of 5/31/2018.

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Disclaimer: Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. U.S. investors only: To obtain a prospectus containing this ...

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