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September 12, 2008 – Comments (9) | RELATED TICKERS: SKF

I'm hoping I can get a good answer to this, since I'm willing to bet I'm not the only one who would like to fully understand this.

I got SKF on here at $106, and figured it would've taken off by now, but it hasn't.

So, while I realize that SKF is an ultrashort of the (Dow Jones) financials, can someone please explain...

1)  How exactly does an "ultrashort" work (what makes it an "ultra" short)?

2)  Exactly what financials is it ultrashorting?

I can't believe that with Fannie and Freddie dying, LEH in freefall, WM questionable, and AIG nose-diving today that SKF wouldn't be higher than it is.

Thanks in advance.

9 Comments – Post Your Own

#1) On September 12, 2008 at 7:06 PM, LordZ wrote:

Money in and out also affects the price, not just performance.

SKF is a derrivative trade mirroring the inverse of dow financials times 2

 

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#2) On September 12, 2008 at 7:07 PM, rd80 (98.44) wrote:

Look at what BAC, JPM, WFC and UBS have done last week for your answer on why the SKF didn't take off on the other bad news.

I don't know exactly how they get double inverse returns, but suspect it would have to be done with option contracts.

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#3) On September 12, 2008 at 7:20 PM, kdakota630 (29.66) wrote:

OK, I don't completely understand the "ultra" short aspect, but understand enough that I grasp the concept that I don't need any more detail there.

But can anyone tell me (or show me where to find) which specific financials SKF ultrashorts?

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#4) On September 12, 2008 at 7:25 PM, HooDaHeckNose (96.35) wrote:

http://www.proshares.com/

Everything you want to know, direct from the source.

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#5) On September 12, 2008 at 7:34 PM, TMFinept (91.24) wrote:

The leverage is achieved with swaps. The goal is to get 2x the inverse daily performance of the Dow Jones US Financials Index.

Components are here (it's an Excel file): http://www.djindexes.com/mdsidx/index.cfm?event=components&symbol=DJUSFN

Yahoo! link to the index: http://finance.yahoo.com/q?s=%5EDJUSFN

The terrible performers that you cite already hold very low weightings by virtue of their continuing poor performance. They impact the index less and less as they perform worse and worse. Only AIG still holds an appreciable weighting in the index and in that case the index is doing what it's designed to do, namely protect investors from a few stinkers through diversified holdings.

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#6) On September 12, 2008 at 7:34 PM, TMFinept (91.24) wrote:

The leverage is achieved with swaps. The goal is to get 2x the inverse daily performance of the Dow Jones US Financials Index.

Components are here (it's an Excel file): http://www.djindexes.com/mdsidx/index.cfm?event=components&symbol=DJUSFN

Yahoo! link to the index: http://finance.yahoo.com/q?s=%5EDJUSFN

The terrible performers that you cite already hold very low weightings by virtue of their continuing poor performance. They impact the index less and less as they perform worse and worse. Only AIG still holds an appreciable weighting in the index and in that case the index is doing what it's designed to do, namely protect investors from a few stinkers through diversified holdings.

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#7) On September 12, 2008 at 7:49 PM, kdakota630 (29.66) wrote:

TMFinept, thanks!!!

That Excel file was EXACTLY what I was looking for.

I'd already tried www.proshares.com but didn't find that there.  Either that info wasn't there, or I simply couldn't find it (which is the more likely of the two).

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#8) On September 12, 2008 at 9:04 PM, FeastOrFamine46 (99.34) wrote:

thanks for asking this question, kdakota, and thanks for your answer, tmfinept. I've been wondering about this, too, and that excel sheet is, as kdakota said, EXACTLY what I was looking for.

:) 

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#9) On September 12, 2008 at 11:04 PM, bdash (27.30) wrote:

Im shocked about FNM and FRE versus the movements of financial stocks as well; its infuriating, everything I predicted is happening and im losing money! The other shocking thing is that commodities, especially gold, didn't head for the sky.

in terms of SKF heres what I found: 

Ultrashort is simply the name; it indicates that it move at twice the inverse of the movement of the financial sector (or at least thats the idea). 

from Fidelity:

Holdings: 13.09% of port.

13.06% in Djusfn Swaps (I assume this is a derivitave, I know nothing about it).

0.03% in Ultrashort Financials.

the rest is cash.

NAV is about $3 higher than closing price and market cap is about $3B.

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