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Discussion Starter #1
From my understanding of ETF's they are designed to trade within a certain range and certain 'market makers' are supposed to buy and sell the stock when it goes outside of that range to keep it constant. If this is true, then shouldn't the stock price always stay within the specified range (may 6th being an exception when such systems went wacky). So couldn't you just set some auto buy/sell trades so that as the stock bounced you would trade it? I'm obviously missing something as this seems pretty simple.
 

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From my understanding of ETF's they are designed to trade within a certain range and certain 'market makers' are supposed to buy and sell the stock when it goes outside of that range to keep it constant. If this is true, then shouldn't the stock price always stay within the specified range (may 6th being an exception when such systems went wacky). So couldn't you just set some auto buy/sell trades so that as the stock bounced you would trade it? I'm obviously missing something as this seems pretty simple.
They are designed to trade as closely as possible to whatever index the ETF is based on. When you say "range" - are you referring to some sort of tolerance range for the ETF? ie how far away from the index it can go?

Regardless, I'm not aware of any sort of market manipulation for ETFs.
 

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When you say stock price, do you mean the ETF or the underlying stock?
If you meant the ETF, I don't see why it should trade range bound.
Depending on economic conditions, an ETF unit price increase/decrease just like any other stock.

If you meant the underlying stock, again, that trades independently of the ETF.
The buy/sell of the containing ETF units should not affect the underlying stock price, unless the % share of a particular stock within the ETF is being changed consciously by the management by buying/selling.
 

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Discussion Starter #4
They are designed to trade as closely as possible to whatever index the ETF is based on. When you say "range" - are you referring to some sort of tolerance range for the ETF? ie how far away from the index it can go?

Regardless, I'm not aware of any sort of market manipulation for ETFs.
I'm guessing you are right. The price is just based on the index, and because the index compromises such a large grouping, it generally moves slowly. I ask as one of the stocks I own (CDZ) just seems to bounce in that range over a month or so and I wanted to know if there was any kind of actual reasoning for staying within that range. It's a stock that I'm willing to hold for a long time so I've thought about doing exactly this since it has been so consistent. However just remember as the mutual fund companies say: past performance is not a guarantee of future performance...
 

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I'm guessing you are right. The price is just based on the index, and because the index compromises such a large grouping, it generally moves slowly. I ask as one of the stocks I own (CDZ) just seems to bounce in that range over a month or so and I wanted to know if there was any kind of actual reasoning for staying within that range. It's a stock that I'm willing to hold for a long time so I've thought about doing exactly this since it has been so consistent. However just remember as the mutual fund companies say: past performance is not a guarantee of future performance...
You should check out the prices over a longer time period. It looks like the price went down to about $11 in Jan/Feb 2009.

That would have been a good time to buy. :)
 

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You should check out the prices over a longer time period. It looks like the price went down to about $11 in Jan/Feb 2009.

That would have been a good time to buy. :)
Would would be really helpful though is knowing when the next time it'll be worth around $11. Then when it'll be worth a whole lot more.

:D
 

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The trading range is the aggregate of the individual component trading ranges and should theoretically be narrower. But with the lack of independence of the components, the results will be amplified.

The other issue is tracking error. But this is more from sector ETFs that attempt to track the subset of the market with a sampling of holdings. Such tracking errors can sometimes become substantial. But they generally do not apply to overall index ETFs.
 
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