Swing Trading Strategies & Stock Picks Since 2003



Watch Trading Videos for FREE now!
draw trend
You Are Here: Home > Articles > Stock Picks > ProShares surprises investors today

ProShares surprises investors today
Dec 24, 2008

Picture

Sal

add Trade Radar
More articles
Font Size:
Text size
Text size
Text size

A big selection of ProShares ETFs went ex-dividend today. The surprise in the announcement was that a short term capital gain was also declared for these ETFs and it many cases it was a whopper.
The chart below shows the dividend, the capital gain and the impact it had on the price of each ETF. I have chosen to use just a few ETFs as an illustration of the general situation though there was a total of 35 ETFs that went ex today (see the full list at the ProShares site).

Fund Name Ticker Dividend S.T. Cap Gain Closing price 12/22/2008 ex-dividend price percent change
UltraShort QQQ QID 0.005739 9.49928 68.82 59.31 14%
UltraShort Dow30 DXD 0.027612 16.0274 73.12 57.06 22%
UltraShort S&P500 SDS 0.028553 11.46188 87.44 75.95 13%
UltraShort MidCap400 MZZ 0.007783 23.84952 88.39 64.53 27%
UltraShort Russell2000 TWM 0.066508 25.00731 94.22 69.15 27%
UltraShort Basic Materials SMN 0.008847 26.57907 69.48 42.89 38%
UltraShort Consumer Services SCC 0.008631 33.91358 124.92 91.00 27%
UltraShort Real Estate SRS 0.023996 4.56656 61.03 56.44 8%

You can see that the combination of the dividend and the short term capital gain had a large effect on the price of each ETF. Reductions in price ranged from 8% to 38%.
It's true that investors receive the income from this action. The problem is that the money is taxable and ProShares gave little warning that today was the ex-dividend date. They made the announcement last night and today it took effect. For those who were holding the ETFs for just a few days or as a quick overnight trade there was no opportunity to sell the ETFs beforehand - they are now stuck paying taxes on the capital gains.
Why are the distributions so big? As it says on the ProShares site, all ETFs are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually.
So here is another aspect of the ProShares ETFs that investors need to be cautious about. As if these ETFs weren't volatile enough already.

Rate this article

 
 
(click to rate) 


QID
C:35.8600

Rate QID

 

(click to rate)


Back to top


You Are Here:Home > Articles > Stock Picks > ProShares surprises investors today

BUY? SELL? HOLD?
Find out now.

Latest Articles