Discuss as an investment

CFA General
#1

Discuss as an investment: UDN (PowerShares DB U.S. Index Bearish Fund)

#2

In my book, currency trading doesn’t qualify as investing. However, if I were to make a trade like this I’d look at each currency separately and apply the 4 fundamental drivers of currency movements that the CFA outlined in the level 3 material (I can’t remember what they are now but they sure sounded good).

#3

So these guys charge you 50 bp to short and roll one futures contract - an act that requires about 8 minutes work every 3 months. Of course, they need to send out statements and stuff but I wouldn’t pay anyone a wrap fee of 50 bp to send me brokerage statements once a month with one futures contract on it. If you want to do this, get a freaking futures trading account. If you don’t have enough money to get a futures trading account, you don’t have enough money to speculate in FX markets.

#4

For the ignorant (moi) a diversified fund is not a bad idea. There are banks/brokers where you can speculate straight FX with small $$$. Instead of “investing” in UDN, why not short UUP?

#5

1 futures contract = diversified fund? Say what?

#6

I was referring to the UDN/UUP ETFs. (Yahoo Finance calls them “non-diversified” ETFs, by the way.) My opinion is that it’s not a bad idea in that it’s a quick and easy way for a retail trader to get into a basket of currencies. I suggested shorting the opposing ETF to get around expenses and contango. However, I don’t have experience with these particular ETFs… so I’ll stop there. 1 futures contract <> diversified fund