Frequently Asked Questions
Dr K Market Direction Model
The ETF is thinly traded. Should I be concerned?
On the issue of liquidity, market makers do create or suppress instantly as many shares as they want, arbitraging with the derivative markets. Thus, you should get a clean execution price without slippage whatever the offered bid and ask volumes, even if the ETF is thinly traded. It is very different from what happens with individual stocks. That said, make sure that if the ETF is thin, you can get into and out of the ETF with minimal slippage in a timely manner. Discuss it with your broker or with whomever executes your trades just to confirm.
Published: Nov 16 2010