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In case you haven't heard, on Tuesday the AMEX will start offering a
unit trust called a DIAmond which represents %1 of the value of the
Dow Jones Industrial Average. For those of you familiar with SPYders,
DIAmonds will work the same way only using the DJIA instead of the
S&P500.
Here are some relevant quotes from a Barron's article on DIAmonds:
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"Diamonds will turn the Dow into a publicly traded stock, enabling
investors to buy and sell the index at any time during the trading day.
Each Diamond (ticker DIA) will sell for the equivalent of 1% of the
value of the index."
"It's anticipated that the bid/offer spread on Diamonds will be just
1/16- to 1/8-point, due in part to the liquidity provided by Dow
futures and options."
"One advantage of Diamonds will be annual fees of less than
2/10-point, a full point below the expenses of the average mutual fund."
"It's unlikely the big full-service brokers will aggressively market
Diamonds to their clients because it's more lucrative for them to sell
mutual funds or the various unit trusts that invest in the Dogs of the
Dow, the 10 highest-yielding stocks in the index. Brokers aren't crazy
about one-decision investments like the Diamonds. They much prefer
selling products like mutual funds that provide annual fees. The
Diamonds have some distinct advantages over the Dogs trusts because of
lower fees and a more tax-efficient structure."
"Diamonds can be bought on margin like a stock, but unlike stocks,
they can be shorted on price declines, or downticks. This offers a way
for investors to hedge their portfolios or go short, even in falling
markets when price upticks are uncommon."
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That last point is what makes DIAmonds _very_ exciting to me.
<SHAMELESS PLUG>
Of course, you can follow the EOD value of your DIAmond or SPYder at
http://coolhistory.com/ChipsCharts ;-)
</SHAMELESS PLUG>
Good trading,
Chip
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