For those interested in the previously posted $CDNX /XVX.TO trade idea, here’s my reply to a question that I just received regarding the low volume on the XVX.TO:
I meant to address the low volume on the XVX.TO but forgot to add that to the post. I generally try to avoid low volume securities but since this is an ETF that tracks the value of the index, it should climb or fall roughly in-line with the $CDNX unlike a thinly traded stock, which can experience huge disconnects between the stock price and the intrinsic value of the company. Yes, there are some fairly wide spreads but right now I show the XVX.TO at 12.51 x 12.56, or only a 5 cent spread. Limit orders are always best to use (vs. market orders) on thin stocks so for example, an order to buy XVX.TO at 12.54 or 12.55 is likely (but not guaranteed) to get filled whereas a market order could possibly get filled above the current ask price of 12.56.
If the $CDNX/XVX.TO trade was expected to be a relatively quick trade (a few days to a couple of weeks) with much lower price targets, I would probably not have mentioned it as the slippage from the spreads on the round trip (buying and selling) would eat away at a good chunk of the profits. However, with my first target about 18% above the entry point and the second and final target offering a 37% profit if hit, a 5 cent spread on a C$12.5 stock isn’t too bad (the $USD & $C only have about a 10% differential right now at C$1.10 per $1 USD). Yes, those spreads can widen (or contract, if volume were to start coming into XVX.VO) but again, the fact that this ETF is tracking the index should keep prices relatively inline to the price moves in the $CDNX thereby, hopefully eliminating the liquidity risk that can be present when trying to exit a position in a very thinly traded stock of a company(in which few to any willing buyers may be present to take the other side of your trade when you decide to sell your shares).
Finally, although I didn’t look into see if there were any futures that track the $CNDX (which would probably be just as thin, if not worse), XVX.TO was the only vehicle that I could find as a pure play on the index. One alternative to give direct exposure to the junior miners (some of which may or may not be in the $CDNX) would be GDXJ, (Market Vector Junior Gold Miners ETF), as 60.1% of the holdings in GDXJ are Canadian junior mining cos. Hope this helps, let me know if you have any questions.