Money Stuff: The Podcast Chaos Factor: ARKF, 10Q, 10%
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Sep 19, 2025 Dive into the world of ARK ETFs and discover the mechanics of 'heartbeat' trades used for IPO allocations. Explore the hot debate on moving to semiannual earnings reporting and its implications for transparency and volatility. Unpack the booming market for structured products, learning how banks create enticing auto-callable notes and the risks involved. Meanwhile, Katie shares her vacation plans, adding a light-hearted touch to the financial discourse.
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ETF Creation Trade To Capture IPO Pop
- Katie and Matt describe a scheme using ARK ETFs to capture IPO pops by creating shares via borrowed underlying stocks.
- The trader delivers borrowed stocks to the ETF, gets ETF shares, then redeems after the IPO to isolate the IPO gain.
Arbitrage Can Divert ETF IPO Gains
- The creation-redemption trick can massively inflate an ETF's assets for days and siphon IPO gains to arbitrageurs.
- That extraction effectively takes returns away from long-term ETF investors who miss the transient creation.
Limit AP Privileges To Prevent Exploitation
- ETF issuers can limit abusive creations by restricting authorized participants or revoking AP privileges.
- Funds should use creation-controls when third parties exploit ETF plumbing for short-term arbitrage.