Online Trading Blog

  • Weekly Stock Market Insights.
  • Trading Strategies, Products & Info
  • Indicators, Candlesticks & Patterns
  • Be a Subscriber be a Happy Trader
  • Click here to Explore the sitemap.

 

Monday, August 17, 2009

IPO Exchange Traded Funds

IPO Exchange Traded Funds or IPO ETFs are ETFs which track stocks recently held in an Initial Public Offering (IPO). They were introduced in 2006 and are gaining popularity. IPO ETFs help investors to profit from the most expected quick growth of stocks in the initial years of public trading and from some of the companies with the highest growing potential.

The index tracked, and portfolio management of IPO ETFs vary considerably. For example the First Trust IPOX-100 tracks the IPOX-100 index, which includes 100 largest IPOs by capitalization. The index follows specific rules for including IPO stocks.
  • The index includes only US corporations.
  • A number of securities/sectors are excluded such as REITs (Real Estate Investment Trusts), CEFs (Closed Ended Funds) and ADRs (American Depository Receipts).
  • To be included, the companies should have a market capitalization of at least $50 million and an IPO of at least 15% outstanding shares.
  • For avoiding the high volatility/speculation of prices, the stocks are included only after seven days of public trading.
  • Stocks with more than 50% gain on the first public trading day are also excluded.
  • Stocks are removed from the index on their 1000th day of trading.
IPO ETFs are periodically adjusted to include and exclude stocks; most ETFs do it quarterly. Because of this, they tend to have higher expense ratio than traditional ETFs. IPO exchange traded funds are considered risky investment instruments as IPO stocks can show greater volatility than others and the portfolio includes many small corporation stocks.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

posted by Daniel Pipitone at 7:33 AM

Blog Home    Archive List    << Previous     -    Next >>

Privacy Statement | Margin Disclosure | Risk Disclosure | Business Continuity Plan | Site Map | Order routing Disclosure Penson | Blog

The risks involved with online trading can be financially substantial. Online trading system delays or market volatility may adversely affect online trading related services. Not all securities, services or products are available in all countries or U.S. states. Please consider whether online trading is compatible with your financial resources and individual circumstances. Online trading in extended hours entails additional risks such as lower trading liquidity, higher volatility, more rapidly changing prices, wider spreads, and the like. Nothing herein should be deemed as an offer or solicitation of securities trading, products or services in any jurisdiction in which online trading brokerage services are not properly licensed. SIPC insurance does not apply to futures or forex business.

Brokerage Services by NobleTrading.com Member finra/sipc/nfa/pcx
Copyright NobleTrading.com ®, Inc 2009. All rights reserved.