Put These ETF Trading Strategies To Work for You (2024)

Invest in the Market With ETFs

Like an index, you can use ETFs to invest in the stock market or even play market volatility. There are ETFs for the NASDAQ like the QQQ. There are ETFs for the S&P like the many SPDRs. There is a Dow Jones ETF (DIA). And for those who want to trade market vol, there are quite a few ETFs and ETNs that track the Cboe Volatility Index (VIX).

And you don’t have to stop with those markets, there are many more markets just waiting for buyers and sellers, and there are just as many market ETFs that track them.

Use ETFs To Gain Exposure to an Industry

Maybe you don’t want to invest in a market as much as a particular industry. Do you think producing clean coal is the next “green” advancement? Maybe a coal mining ETF is the way to go. Whether it’s financials, defense, utilities, or even technology, it’s much easier to buy an industry ETF than trying to corner the market in sector equities.

Invest in Commodities Without Investing in Commodities

Let’s face it; you don’t have room in your basem*nt for a barrel of oil, a chest of gold, and some cattle (or maybe you do). However, you do have room in your portfolio for commodity ETFs. Without stocking up on livestock, you can purchase a commodity ETF and have instant exposure to the commodity market. It’s a much easier transaction, and you don’t have to water it.

Foreign ETFs Give You Access to International Markets

Foreign investing can get complicated. Currency adjustments, foreign tax laws, and just general overseas challenges. However, there are ETFs that make international investing much easier. Foreign market ETFs, funds that are domestic currency-based, emerging market ETFs, broad foreign funds, and even ETFs that track individual countries like Brazil and China. There’s no longer any reason to fear investing outside the U.S. or any country. The world is your ETF.

Bond ETFs Are the Gift That Keeps Giving

Bonds ETFs are a little more enticing than most investments because they not only trade on secondary markets, but they can also create a revenue stream in your portfolio.

Bond investing, in general, can be difficult. Coupon rates, default risk, duration. However, a bond ETF can alleviate some of that complexity by giving investors one pre-packaged asset that gives instant access to the bond market.

ETNs

There are variations of ETFs known as ETN’s; exchange traded notes. ETNs are assets issued by a major bank as senior debt notes - unlike ETFs which consist of securities such as commodities, currencies, futures, forwards, and options.

When you buy an ETN, you buy a debt asset similar to a bond, but the terms of the debt contract are determined by the structure of the note. ETNs are backed by a bank with a high credit rating, so they are pretty secure products. However, ETNs are not without credit risk, just a lower level of risk.

Play the Currency Market With ETFs

Bond ETFs and ETNs are two ways to play the interest rate market, but when it comes to foreign interest rate trading, look no further than currency ETFs. Whether you want to invest in a broad currency asset, a regional currency like Europe, or even an individual country currency, ETFs have got you covered…literally. Currency ETFs are a great way to hedge foreign risk, play foreign interest rates, or just invest in foreign currencies.

Playing ETFs on the Downside

For every buy trade, there’s a sell trade on the other side. Most people associate investing with buying, but that only covers 50% of every trade. So it makes sense that there are ETFs specifically created for bearish investors.

Creating downside is possible by selling any ETF, but what if I told you that you can buy an ETF and still get short. It’s true, and it’s called an inverse ETF. Perfect for investors who have restrictions against selling, but want to get short; they can buy an inverse ETF.

Hedging Risk With ETFs

Again we come back to “investing means buying.” But a big part of investing is also protecting against risk. That’s where ETFs can help. Do you have a large diversified portfolio that wins when the market rises? Protect downside by selling a market ETF. Short a lot of oil stocks? Buy an oil ETF to protect your upside exposure. Long an index? Protect your position by selling an underlying ETF.

Hedge Indexes With ETFs

I alluded to this above, but ETFs are a great way to protect index positions. If you’re long a particular index, you can make an opposing trade to protect your risk. Some indexes have multiple ETFs that track it, so the opportunities can be plentiful when it comes to hedging your index risk. Trade an ETF to protect some or all of your index position or in some cases put on a similar index position by using an ETF instead. After all, that’s why they were created.

Explore Your Options With ETF Options

There are many ways to utilize ETF options. You can use them to hedge ETFs (and vice versa) or even the correlating index. ETF calls can be great assets to gain upside exposure without tying up a lot of money, and puts are a way to get short as well. You can even use advanced ETF option strategies to take a volatility position or just trade for market value. If there’s an ETF that lists options, then you have…options.

Play Earnings Season With ETFs

At least four times a year, you’re going to have to prepare for earnings season. ETFs can help with that game plan. Whether you use ETFs to get long a promising sector, protect against any earnings surprises, or play earnings volatility with ETF option straddles, there’s an earnings strategy for you. If you have earnings announcements looming on your securities, ‘​tis the earnings season for ETFs.​

Trade ETFs That Fit Your Investing Style

Do you tend to favor large-cap securities? Do you like to invest in value stocks? Either way, there’s an ETF for you. Be it growth, value or blend, or even large, mid, or small-cap, there’s an ETF to fit your strategy. It’s important to be comfortable with your portfolio, and style ETFs are just the asset to fit your investing style.

There are many investors who are new to ETFs, so this is a perfect way to see if any of these 14 ETF trading strategies can be a fit for a portfolio. No asset is going to be perfect. However, there’s a very strong case to be made for including exchange traded funds in your investment strategy and not a lot of reasons not to.