Angelica Lopez- 400002613

Derivatives
March 3rd, 2020- WEEK 3 REPORT

The Value of Active Portfolio Trading

Over the course of this week ( February 24th- February 28th) , trades were made in

Mutual funds, Levered ETFs, and Ultra Short ETF. Indeed, my most insightful trade was

selling 20% of the Large Cap ETFs and 20% Non-US ETFs and purchasing mutual funds.

Prior to this stimulation, I had no knowledge of mutual funds and their intrinsic benefits. For

starters, this investment allowed me to buy into a wide range of stocks, bonds, money

markets, and other securities all at once. Unlike the ETFs, Mutual funds are professional

managed and come in several different “flavors.” Essentially, these trades represent an easy

way to diversify , and they don’t require frequent attention. With the current conditions of the

market and the effects of the coronavirus pandemic, I decided to sell 20% of Large Cap and

Non-US ETFs that were yielding the highest negative returns, namely TQQ, QLD, VOO

Non-US ETF PSI and VSS . In turn, the portfolio was rebalanced, by investing in a diverse

array of Large growth, Corporate bond, Real estate and the Health sector mutual funds.

Investments in Non-US mutual funds comprised of funds from Europe, Latin America, Asia

and Japan. Broad Index ETF- Schwab Strategic Trust CSIM Large Cap (SCHX) was sold

to purchase a levered ETF, namely ProShares Ultra Dow30 (DDM). This levered ETF seeks

daily investment results that correspond to two times (2x) the daily performance of the Dow

Jones Industrial Average. In the process of purchasing leveraged ETFs, I learnt that it uses

financial tools to double or triple the index it tracks (either negatively or positively). Surely

then, this would increase the systematic risk of U.S securities. Lastly, to reduce my exposure

to international equities, I purchased Proshares Trust- Proshares Ultra Short Euro (EUO)

ETF. I learnt that an ultrashort ETF holds assets whose value goes up when the fund’s
targeted asset-class benchmark goes down. Since the market has been drastically down for a

while, purchasing Ultra short ETF should yield favorable returns. Moreover, ProShares Ultra

Short Euro (EUO) seeks daily investment results that correspond to two times the inverse (-

2x) of the daily performance of the price of the euro versus the U.S. dollar.

Since the Stimulation commenced, the trades for this week has been the most

insightful. I learnt that an investment in mutual funds is an alternative way to diversify my

portfolio. Moreover, I also learn that buying levered ETF’s can double or triple the index that

it tracks which can impact my portfolio either negatively or positively. In the face of

devasting market conditions, I was able to see the value in purchasing Ultra Short ETF which

essentially holds assets whose value works in inverse with the market. Overall, the most

important insight gained is the value of active portfolio trading. By Selling broad index

ETF’s and purchasing mutual funds, levered ETF and Ultra Short ETF, I was able to offset

losing investments with winning investments. Moreover, active portfolio trading helped me

to engage in risk management and to take advantage of current market conditions