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The ETF industry is seeing explosive growth, piling up huge assets amid the stock market volatility. There is enough liquidity in the ETF world, with most of the funds trading at extremely higher volumes. Volume can be determined by the number of shares traded in a particular period. High trading volume indicates high liquidity, which is a key characteristic of ETFs.
Here's why volume is relevant:
Liquidity: High-volume ETFs are more liquid, meaning they can be bought or sold easily without causing a significant price change. This is important for investors as it allows them to enter or exit positions without impacting the price too much.
Bid-Ask Spread: High-volume ETFs typically have narrower bid-ask spreads. The bid-ask spread is the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. A narrower spread means lower transaction costs for investors.
Price Discovery: High trading volumes can lead to better price discovery, which means the market price of the ETF more accurately reflects its underlying value. This is because, with more trades, there's a higher likelihood that the ETF price will reflect the collective knowledge and sentiment of a larger pool of investors.
Market Impact: If an ETF has a low trading volume, large trades can significantly impact its price. This is less of a concern with high-volume ETFs.
Lower Tracking Error: High trading volumes might help in better tracking of the underlying index, leading to a lower tracking error, especially for index ETFs. This is because the arbitrage mechanism works efficiently when the ETF is actively traded.
Indication of Interest: High trading volume can also be an indication of high interest in a particular market or sector. For example, if an ETF that tracks a specific industry has high trading volume, it could indicate that many investors are interested in that industry.
Volatility: ETFs with low trading volumes can sometimes be more volatile than those with high volumes. This is because a small number of trades can have a larger impact on the price of the ETF.
That said, we have highlighted 10 ETFs that have seen higher average volumes over the past three months and are thus the top 10 funds by trading volume, per etfdb.com (see: all the Category ETFs here).
ProShares UltraPro Short QQQ (SQQQ - Free Report) ) – Average Daily Volume: 121.6 million shares
ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. The index measures the performance of the 100 largest domestic and international non-financial companies listed on Nasdaq based on market capitalization. ProShares UltraPro Short QQQ has AUM of $4.7 billion and charges 95 bps in annual fees.
ProShares UltraPro QQQ (TQQQ - Free Report) ) – Average Daily Volume: 92.1 million shares
ProShares UltraPro QQQ seeks to deliver three times the return of the daily performance of the NASDAQ-100 Index, charging investors 0.86% in expense ratio. The index measures the performance of the 100 largest domestic and international non-financial companies listed on Nasdaq based on market capitalization. ProShares UltraPro QQQ is the most popular and liquid ETF in the leveraged space, with AUM of $16.5 billion (read: 5 Best Leveraged ETFs of the First Nine Months).
SPDR S&P 500 ETF (SPY - Free Report) ) – Average Daily Volume: 73.8 million shares
SPDR S&P 500 ETF tracks the S&P 500 Index and holds 504 stocks in its basket, with information technology, healthcare, financials and consumer discretionary accounting for double-digit allocation each. SPDR S&P 500 ETF charges investors 9 bps in annual fees and has AUM of $407.5 billion. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) ) – Average Daily Volume: 62.3 million shares
Direxion Daily Semiconductor Bear 3x Shares targets the semiconductor corner of the technology sector with three times inverse leveraged exposure to the ICE Semiconductor Index. Direxion Daily Semiconductor Bear 3x Shares has amassed about $937.3 million in its asset base while charging 89 bps in fees per year.
Direxion Daily Semiconductor Bull 3x Shares (SOXL - Free Report) ) – Average Daily Volume: 53.3 million shares
Direxion Daily Semiconductor Bull 3x Shares targets the semiconductor corner of the technology sector with three times leveraged exposure to the ICE Semiconductor Index. Direxion Daily Semiconductor Bull 3x Shares has amassed about $5.8 billion in its asset base, while charging 89 bps in fees per year.
Invesco QQQ (QQQ - Free Report) ) – Average Daily Volume: 49.3 million shares
Invesco QQQ provides exposure to the 101 largest domestic and international companies, excluding financial stocks, by tracking the Nasdaq-100 Index. It has AUM of $197.4 billion and charges 20 bps in annual fees. Invesco QQQ has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Financial Select Sector SPDR Fund (XLF - Free Report) ) – Average Daily Volume: 38 million shares
Financial Select Sector SPDR Fund seeks to provide exposure to 72 companies in the diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. Financial Select Sector SPDR Fund is an ultra-popular financial ETF with AUM of $30.5 billion. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
ProShares Short QQQ (PSQ - Free Report) ) – Average Daily Volume: 33.4 million shares
ProShares Short QQQ offers inverse exposure to the daily performance of the Nasdaq-100 Index. It has amassed $1 billion in its asset base and charges 95 bps per year (read: Inverse ETFs to Play If Nasdaq Slumps Ahead).
iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) ) – Average Daily Volume: 32.4 million shares
iShares iBoxx $ High Yield Corporate Bond ETF is the largest and most liquid fund in the high-yield bond space, with AUM of $14.3 billion and an expense ratio of 0.49%. It offers exposure to a broad range of U.S. high-yield corporate bonds. iShares iBoxx $ High Yield Corporate Bond ETF tracks the Markit iBoxx USD Liquid High Yield Index and holds 1,202 securities in the basket. It has a Zacks ETF Rank #3 with a High risk outlook.
iShares China Large-Cap ETF (FXI - Free Report) ) – Average Daily Volume: 32.2 million shares
iShares China Large-Cap ETF offers exposure to large companies in China by tracking the FTSE China 50 Index. It holds 50 stocks in its basket with a slight tilt toward the top three firms. iShares China Large-Cap ETF has key holdings in the consumer discretionary sector with 35% share, while financials (27.5%) and communication (19.7%) round off the next two spots. iShares China Large-Cap ETF has AUM of $5.1 billion and an expense ratio of 0.74%. It has a Zacks ETF Rank #5 (Strong Sell) with a Medium risk outlook.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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10 Most Actively Traded ETFs of Q3
The ETF industry is seeing explosive growth, piling up huge assets amid the stock market volatility. There is enough liquidity in the ETF world, with most of the funds trading at extremely higher volumes. Volume can be determined by the number of shares traded in a particular period. High trading volume indicates high liquidity, which is a key characteristic of ETFs.
Here's why volume is relevant:
Liquidity: High-volume ETFs are more liquid, meaning they can be bought or sold easily without causing a significant price change. This is important for investors as it allows them to enter or exit positions without impacting the price too much.
Bid-Ask Spread: High-volume ETFs typically have narrower bid-ask spreads. The bid-ask spread is the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. A narrower spread means lower transaction costs for investors.
Price Discovery: High trading volumes can lead to better price discovery, which means the market price of the ETF more accurately reflects its underlying value. This is because, with more trades, there's a higher likelihood that the ETF price will reflect the collective knowledge and sentiment of a larger pool of investors.
Market Impact: If an ETF has a low trading volume, large trades can significantly impact its price. This is less of a concern with high-volume ETFs.
Lower Tracking Error: High trading volumes might help in better tracking of the underlying index, leading to a lower tracking error, especially for index ETFs. This is because the arbitrage mechanism works efficiently when the ETF is actively traded.
Indication of Interest: High trading volume can also be an indication of high interest in a particular market or sector. For example, if an ETF that tracks a specific industry has high trading volume, it could indicate that many investors are interested in that industry.
Volatility: ETFs with low trading volumes can sometimes be more volatile than those with high volumes. This is because a small number of trades can have a larger impact on the price of the ETF.
That said, we have highlighted 10 ETFs that have seen higher average volumes over the past three months and are thus the top 10 funds by trading volume, per etfdb.com (see: all the Category ETFs here).
ProShares UltraPro Short QQQ (SQQQ - Free Report) ) – Average Daily Volume: 121.6 million shares
ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. The index measures the performance of the 100 largest domestic and international non-financial companies listed on Nasdaq based on market capitalization. ProShares UltraPro Short QQQ has AUM of $4.7 billion and charges 95 bps in annual fees.
ProShares UltraPro QQQ (TQQQ - Free Report) ) – Average Daily Volume: 92.1 million shares
ProShares UltraPro QQQ seeks to deliver three times the return of the daily performance of the NASDAQ-100 Index, charging investors 0.86% in expense ratio. The index measures the performance of the 100 largest domestic and international non-financial companies listed on Nasdaq based on market capitalization. ProShares UltraPro QQQ is the most popular and liquid ETF in the leveraged space, with AUM of $16.5 billion (read: 5 Best Leveraged ETFs of the First Nine Months).
SPDR S&P 500 ETF (SPY - Free Report) ) – Average Daily Volume: 73.8 million shares
SPDR S&P 500 ETF tracks the S&P 500 Index and holds 504 stocks in its basket, with information technology, healthcare, financials and consumer discretionary accounting for double-digit allocation each. SPDR S&P 500 ETF charges investors 9 bps in annual fees and has AUM of $407.5 billion. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) ) – Average Daily Volume: 62.3 million shares
Direxion Daily Semiconductor Bear 3x Shares targets the semiconductor corner of the technology sector with three times inverse leveraged exposure to the ICE Semiconductor Index. Direxion Daily Semiconductor Bear 3x Shares has amassed about $937.3 million in its asset base while charging 89 bps in fees per year.
Direxion Daily Semiconductor Bull 3x Shares (SOXL - Free Report) ) – Average Daily Volume: 53.3 million shares
Direxion Daily Semiconductor Bull 3x Shares targets the semiconductor corner of the technology sector with three times leveraged exposure to the ICE Semiconductor Index. Direxion Daily Semiconductor Bull 3x Shares has amassed about $5.8 billion in its asset base, while charging 89 bps in fees per year.
Invesco QQQ (QQQ - Free Report) ) – Average Daily Volume: 49.3 million shares
Invesco QQQ provides exposure to the 101 largest domestic and international companies, excluding financial stocks, by tracking the Nasdaq-100 Index. It has AUM of $197.4 billion and charges 20 bps in annual fees. Invesco QQQ has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Financial Select Sector SPDR Fund (XLF - Free Report) ) – Average Daily Volume: 38 million shares
Financial Select Sector SPDR Fund seeks to provide exposure to 72 companies in the diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. Financial Select Sector SPDR Fund is an ultra-popular financial ETF with AUM of $30.5 billion. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
ProShares Short QQQ (PSQ - Free Report) ) – Average Daily Volume: 33.4 million shares
ProShares Short QQQ offers inverse exposure to the daily performance of the Nasdaq-100 Index. It has amassed $1 billion in its asset base and charges 95 bps per year (read: Inverse ETFs to Play If Nasdaq Slumps Ahead).
iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) ) – Average Daily Volume: 32.4 million shares
iShares iBoxx $ High Yield Corporate Bond ETF is the largest and most liquid fund in the high-yield bond space, with AUM of $14.3 billion and an expense ratio of 0.49%. It offers exposure to a broad range of U.S. high-yield corporate bonds. iShares iBoxx $ High Yield Corporate Bond ETF tracks the Markit iBoxx USD Liquid High Yield Index and holds 1,202 securities in the basket. It has a Zacks ETF Rank #3 with a High risk outlook.
iShares China Large-Cap ETF (FXI - Free Report) ) – Average Daily Volume: 32.2 million shares
iShares China Large-Cap ETF offers exposure to large companies in China by tracking the FTSE China 50 Index. It holds 50 stocks in its basket with a slight tilt toward the top three firms. iShares China Large-Cap ETF has key holdings in the consumer discretionary sector with 35% share, while financials (27.5%) and communication (19.7%) round off the next two spots. iShares China Large-Cap ETF has AUM of $5.1 billion and an expense ratio of 0.74%. It has a Zacks ETF Rank #5 (Strong Sell) with a Medium risk outlook.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.