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Social Media Popularity Doesn’t Show In Social Media ETF

MarketsMuse blog update profiles the social media ETF, The Global X Social Media Index ETF (SOCL). So far this year, SOCL has not been performing very well, which is in contrast to social media performance in everyday life. Social media sites are gaining more users everyday however the trend doesn’t show in SOCL’s performance. Investopedia’s article “Is Social Media ETF SOCL Too Risky?” by Dan Moskowitz investigates the reason this trend occurs. Extracts from the article are below. 

The world is atwitter social media and its rapid growth right now. According to the Pew Research Center, 74% of online adults use a social networking site of some kind, up from 29% in 2008. And more advertising opportunities are blooming alongside the increased usage of mobile devices. In March, for the first time ever, the number of mobile-only internet users exceeded the number of desktop-only internet users, according to research firm comScore.

One of the trendiest ways to invest in social media is via the Global X Social Media Index ETF (SOCL), which tracks the largest publicly held social media firms around the world, including Facebook Inc. (FB), LinkedIn Corp. (LNKD) and Twitter Inc. (TWTR). With the sector’s global growth expected to continue for the long haul, betting on SOCL seems like a no-brainer.

What’s tricky with SOCL is that the trend doesn’t always match the performance. 

For starters, SOCL returned -15.04% in 2014. Take a look at SOCL’s top ten holdings, their percentage of assets, and their one-year stock performances 

The heavier-weighted holdings are performing well, but the 0.65% expense ratio for SOCL comes into play. Also notice that some of the weaker-performing stocks belong to Wall Street darlings — buzzy startups investors loved during their IPOs — that have had difficulty delivering consistent profits: Pandora, Groupon and Twitter, if you’re looking for a big industry name that’s falls farther down in SOCL’s holdings. If these companies are unable to deliver stock appreciation when markets are at all-time highs, then you shouldn’t expect them to perform well when the market takes a turn for the worse.

More people are accessing social media sites every day, a very positive trend. But without positive returns, that trend is irrelevant. Some of the companies/holdings for SOCL have difficulty delivering consistent profits and haven’t yet shown investors a clear-cut path to how they’ll do it down the road. If that’s the case when the stock market is at all-time highs, then it’s highly unlikely for these stocks to appreciate if and when the market falters. Put simply, unless you’re looking for a short-term trade, consider avoiding SOCL. But if the broader market continues to move higher thanks to Federal Reserve assistance and basic momentum, there’s a possibility it will take SOCL with it. As always, do your own research prior to making any investment decisions.

To read the entire article profiling the ETF SOCL, click here.



Social Media ETF Index Weights Facebook (FB) at 8.8%


The Solactive Social Media Index, the index tracked by the Global X Social Media Index ETF (Nasdaq: SOCL), has allocated 8.8% of its weight to Facebook (Nasdaq: FB), according to Global X. The Global X Social Media Index ETF, the lone ETF devoted exclusively to the burgeoning social media ETF, has been widely viewed as the first ETF destination for Facebook, the largest social media company.

It was expected that the index would add Facebook following the end of the stock’s fifth trading, which was Thursday May 24, and that the change would be reflected in the ETF on the next trading day.

Global X could not confirm the weight of Facebook within SOCL, but assuming the 8.8% allocation from the index carries over to the ETF, Facebook would have been SOCL’s fourth-largest constituent on Thursday behind LinkedIn (NYSE: LNKD), China’s Tencent Holdings and Sina (Nadaq: SINA).

SOCL has lost about 5% since Facebook’s IPO on May 18, but the ETF has seen it’s assets under management surge to over $25.1 million from $16 million and its average daily volume jump to over 50,000 shares from 36,000 shares.

At the close of markets on May 24, SOCL was home to 27 stocks with other prominent names including Google (Nasdaq: GOOG), Groupon (Nasdaq: GRPN) and Yelp (NYSE: YELP).

Read more: http://www.benzinga.com/trading-ideas/long-ideas/12/05/2617744/social-media-etf-index-weights-facebook-at-8-8#ixzz1vtceHIRe

What’s Next?..Options Trading On Facebook (FB)

Options on Facebook (NASDAQ: FB) will be available as early as May 29th. With volatile price action in FB after its IPO, traders will look to options strategies to profit

In the next several months FB is going to face pressure to grow into its current 100 Billion dollar valuation. As a growth stock trading over 100 times earnings, any sign of slower growth in Facebook will cause the stock to plummet quickly.Traders who do not think Facebook can hold its current valuation have a number of options strategies to profit from any fast downside price action.

Depending on implied volatilities of FB options, traders can be either short or long volatility. It is unlikely that FB stock will increase or decrease in value by more than 30% in one year. If options are trading will implied volatilities greater than 30%, traders should be net sellers of options. Selling vertical call spreads, which involves selling call options at strike prices above the current price and buying a call option at strike prices even farther out from the current price. This strategy will be profitable if FB maintains its price or decreases.

Notes WallachBeth Capital’s Randy Sharringhausen, an institutional options market expert, “Even if the company’s fundamentals don’t come close to justifying its IPO price, this is a company that has 450 million customers that visit every day and a corporate treasury flush with enough currency to finance any number of  major acquisition to better monetize its customers.  This should prove to be an interesting name to trade by the hedge fund and risk arb community, as well as the long/short managers.”

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#Facebook Over-Booked? Or Over-Cooked?

Breaking News: Bloomberg LP reports Facebook will be raising its IPO price range by 15% (from $28-$34 to $34-$38) and AAPL co-founder Steve Wozniak said he will buy shares in Facebook at the get go, regardless of price.

AAPL co-founder Steve Wozniak

In the same story, Bloomberg LP also reported  a “Bloomberg Global Poll” of more than 1,250 investors, analysts and traders  found 79% of those polled believedFacebook doesn’t deserve such a high valuation (that  poll was based on the lower pricing set just one week ago).