Could a new Active ETF be a Wizard Trader?
Short term trading of stocks, ETFs and options
The Listed Funds Trust Opportunistic Trader ETF, run by OT Advisors LLC, based in Boca Raton, Florida, launched on March 20, 2024, has the ticker WZRD, which may well be an allusion to the Hedge Fund Market Wizards book in which OT founder, Larry Benedict, was interviewed by Jack D. Schwager.
It trades stocks, ETFs, options and futures, and can employ options overlay strategies such as covered calls. This approach, which sells call options on top of the same stock holding, is quite common in the US and can also be called a “buy write” strategy. Some ETFs are purely dedicated to this strategy, but for WZRD it is one of many possible approaches.
The ETF recently disclosed a 23% weighting in stocks in four sectors: electronic technology, finance, consumer durables and technology services. The rest (59%) is mainly in other ETFs with no sector tagging, as well as a bit of cash with some small exposure to rights and warrants, but the allocation could be very different next week or month. The strategy clearly states that most positions are held for less than a week. If turnover was just 55% a week, that would annualize up to 2,750% per year, which is about 100 times higher than the turnover of a typical actively managed ETF, of around 25% a year. Trading involves costs such as commissions and bid/offer spreads, so the manager needs to get it right more often to cover these costs.
Since the product has only been going for a few days, it may be more useful to look at Benedict’s longer term career. He is a veteran trader who previously founded hedge fund, Banyan Equity Management, which ran between January 2000 and 2018, with assets up to USD 800 million. His career began when the Chicago Board of Options Exchange (CBOE) was floor based, and he later traded options for Spear Leeds & Kellogg, and ran their proprietary trading.
He also runs an interactive community chatroom, The Opportunistic Trader, which offers videos, stock tips, option tips, and newsletters. There are different opinions about these sorts of trading advisory services, and it is not straightforward to translate their “tips” into a “track record” due to the exact timing and costs of trades.
Subscribers to Benedict’s newsletters may enjoy making their own investment decisions while those who want to leave the day to day management to Benedict himself could consider the ETF.
This appears to be a semi-transparent ETF since it is not naming individual positions as a fully transparent active ETF would. Therefore, investors have less information about the WZRD strategy and need to place more confidence in Benedict’s judgment.
