Dow Plunges 1,175 Points with Orderly ETF Trading

Markets ETF Trends

U.S. markets plunged Monday, with the Dow Jones Industrial Average briefly plummeting close to 1,600, its biggest one-day point drop ever, while exchange traded fund investors jumped on volatility-related ETFs.

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The Dow finished down 1,175.21 points, or 4.6 percent, at 24,345.75.

CBOE Volatility Index, or VIX, ETFs were among the most actively traded investments on Monday.
For instance, the iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) saw volumes jump to 198 million from its average 24 million, the leveraged ProShares Ultra VIX Short-Term Futures (NYSEArca: UVXY) daily volume was up to 150 million from its average 19 million and VelocityShares Daily 2x VIX Short Term ETN (NYSEArca: TVIX) volume was at 122 million from its average 12 million.

The surge in VIX-related ETF activity is no surprise as the VIX itself increased 124.2% to 38.8, its highest level since mid-2015. VXX rose 60.6%, TVIX gained 67.6% and UVXY advanced 80.8%.

Meanwhile, trading activity was also elevated in a number of ETFs, such as the SPDR S&P 500 ETF (NYSEArca: SPY), Financial Select Sector SPDR (NYSEArca: XLF), iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and PowerShares QQQ (NasdaqGM: QQQ).

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While the equities market experienced a swift pullback, ETFs more-or-less operated smoothly as usual. Nevertheless, investors who were concerned about a repeat “flash crash” situation could have taken better control over their trades through limit orders.

When purchasing or selling ETFs through a brokerage account, investors can choose among a various order types, such as a market order or a limit order. The options also apply to stop-loss orders that trigger an automatic sell when an ETF dips to a certain price.

In fast-moving markets, the price at which a market order will execute often deviates from the last-traded price or ‘real time’ quote. On the other hand, a limit order could have helped an investor prevent a similarly unwanted run-up. Specifically, a limit order is designed to fill at a specific price or better. A buy limit order would purchase the ETF at or below a stated price while a sell limit order will only be triggered at the stated limit price or higher.

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