ETFs are mutual funds, just as closed-end funds are mutual funds, just as open-end mutual funds are mutual funds, meaning, they are all just a collection of tradables --generally stocks, but also bonds or commodity futures-- that suposedly offer broad exposure to an asset class or to an investment theme or idea. But when you pull their schedule of holdings, you’ll discover they are typically just very focused bets on three or four or five names that might make up as much as 40% of the fund’s weighting. As an example, pull the holdings for GDX, GDXJ, RING, and PICK. So this is my question: “Why not trade some of the underlying instead of the ETF?”
Where trading a mutual fund (open-end, closed-end, or exchange-traded) does make sense is when the bulk of their holdings can’t easily be accessed by US-based investors. E.g., pull the holdings for PAK, TUR, or EPHE.