Sometimes traders pigeonhole themselves. They think of themselves as futures traders, equity traders, options traders, etc. However limiting your trading to a single type of instrument can easily leave money on the table. It is not always the case that your preferred instrument is the best vehicle to trade a particular view. In that respect traders should be indifferent to the instrument being used and focus on maximizing risk-adjusted returns.
Let’s look at the situation with silver. There are two funds that hold silver bullion. The first the Sprott Physical Silver Trust (PSLV) is a closed-end fund that trades at a roughly 20% premium to net asset value. The second fund the iShares Silver Trust (SLV) trades roughly at NAV. Both Kid Dynamite and Herb Greenberg have noted this disparity. For some one looking to get long silver SLV provides the most bang for the buck.
For individuals looking for broad equity exposure ETFs are oftentimes the vehicle of choice these days. Indeed ETF proponents have become quite vocal in their belief that ETFs are a better mousetrap. However an open-end mutual fund can provide some unexpected benefits. Some mutual funds these days have built-in, capital loss carryforwards. These carryforwards are an asset to fund that can be used over time to offset future capital gains. At the very least this puts the open-end fund and ETF on an equal tax footing. In the extreme it could push the decision towards an open-end fund.
Earlier today we looked at the profitability, or lack thereof, of retail forex traders. Those traders are by and large trading with these forex firms. On other other hand there are other instruments smaller currency traders could use including e-micro currency futures. These products help resolve some of the agency issues with trading currencies over the counter.
There are of course other issues to take into account including commissions, bid-ask spreads, expense ratios and maybe most importantly differential tax treatments. In addition there is a learning curve with trading different categories of instruments and for some may entail opening new types of accounts.
All that being said, good trading ideas are hard to come by. A good trader should try execute their trades in the most efficient and profitable manner. Why let an unwillingness to trade other types of instruments get in the way?