The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we're going to answer a question from one of our members which is basically, “Can black swan events occur in ETFs?” I think this is actually a really great question because a lot of the benefits of trading an ETF style contract, especially with options, is that you remove in many cases, the unsystematic risk that's in the market. When you’re trading an ETF, it's basically a collection of underlying securities or a tracking mechanism for other sectors or areas. And so, conceivably, not one particular company getting knocked out, in a given day is going to have a huge impact on that ETF. If you even think about just the broad-based indexes like the NASDAQ and the Qs, IWM, SPY, DIA, etcetera, it’s basically just an ETF that tracks the collection of underlying securities. If one stock in that particular collection, say the S&P 500 has an absolutely terrible day, it will impact the index, but not like that one stoc