The opposite trade occurs when ETF shares trade at a discount to their underlying securities.
In the options world, contract prices are directly related to the volatility of the underlying securities.
Schaeffer is an options guy, but the technical indicators he monitors are useful for determining trends in underlying securities, as well.
Still, ETNs may never eclipse ETFs in popularity, if only because most investors still want to own the underlying securities.
Some market makers, called authorized participants (APs), are allowed to interchange ETF shares for their underlying securities, corporate bonds in this case.
The seller can buy (and many have) the securities himself (especially if he has sold more swaps than there are underlying securities).
But unlike closed-end funds, if SuperUnits developed a discount to its underlying securities value, then institutional investors could arbitrage the units and profit risk-free.
The price is based on the market value of the underlying securities and includes cash and other assets and liabilities held by the trust.
FORBES: Why Unit Investment Trusts Can Be A Good Investment Alternative
Goldman counters that the investors, IKB, a German bank, and ACA Capital Management were given extensive information about the underlying securities and the risks.
It also usually knows far more about the underlying securities in the products it structures and packages than the clients who end up owning them.
Since the beginning of the second quarter, U.S. Treasury bond funds have been money makers despite the fact that the underlying securities in the fund yield under 3% annually.
FORBES: US Treasury Bond Funds Still Outperformers, But For How Long?
Its puts and calls are typically exercisable up to six months at prices 20% or more below (or above) the market values of the underlying securities at the time the options are bought.
Because there is so much money flowing into dividend funds, the yields you would otherwise get from holding the underlying securities in proportion to their weighting in these funds is often dampened by the inflows themselves.
These unitholders will receive the then-current net asset value of the units, based on the current market value of the underlying securities in the portfolio, less any remaining deferred sales charge, as of the evaluation time.
FORBES: Why Unit Investment Trusts Can Be A Good Investment Alternative
The biggest difference is that index funds operate in the way all mutual funds do, in that they are priced at the close of the trading day based on the net asset value (NAV) of the underlying securities.
Delta One products will be seen as incorporating a number of underlying securities and as such give the holder an easy way to gain exposure to a basket of securities in a single product. (Swaps, Forwards, Futures and ETF).
Anyone who bought these was seriously burnt, while anyone who sold them or the derivatives on them, like John Paulson and allegedly Goldman, made many fold their money, as the value of the underlying securities often dropped to near zero.
Selling a covered put is more of an abstraction, but you could argue you are doing that if you have cash lying around equal to the value of the underlying securities and wouldn't mind being forced to purchase the securities at the put price.
The rising value of underlying financial securities also benefited these fees.
To hedge its long position in the XRT, Goldman shorted the individual securities underlying the XRT.
FORBES: Ex-Goldman Sachs Trader Charged With Insider Trading
That further reduces the average credit quality of remaining borrowers underlying floating rate securities.
FORBES: Are Floating Rate Funds The Wrong Answer To Rising Rates?
The SEC alleges that Goldman failed to tell investors of the role of Paulson in choosing mortgage securities underlying the Abacus deal.
In-kind distribution - Unitholders may generally request an in-kind distribution of the securities underlying the units if they own 2, 500 or more units at either the time of purchase or maturity.
FORBES: Why Unit Investment Trusts Can Be A Good Investment Alternative
Market timing is the rapid trading of mutual-fund shares in order to take advantage of the gap between the price of a fund, which is set once a day, and the continuous changes in the value of the underlying portfolio of securities.
The analyst even said that the extension is a positive in that the holders of the notes are continuing to work with the company on the liquidation of the underlying mortgage-backed securities, which are serving as collateral for the debt.
Dozens of "inverse" ETFs move in the opposite direction of their underlying index or basket of securities.
Modifying the terms of the underlying mortgages for some of these securities will mean payments even lower than the amounts investors had counted on when they bought the mortgage pools in the first place.
Dr. JOSEPH MASON (Associate Professor of Finance, Drexel University's LeBow College of Business): Some of the securities created can be safer than the underlying risk of the pool.
Investors want to minimize volatility and to maximize certainty, and the prices that the market assigns to various securities incorporate the consistency with which the underlying company can be counted on to perform well.
Mortgage securities, like other packaged products, slice and dice underlying mortgage paper into different segments, or tranches, that investors buy based on what risk they want to assume.
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