A large trader used a pair of ETFs to swap out of the agriculture sector and into a sizable oil position on Wednesday. The $60 million trade shows how institutional investors and hedge funds are using liquid ETFs to trade sectors and asset classes.
Shortly after 11 am Eastern on Wednesday, a big trader appears to have sold about $60 million worth of PowerShares DB Agriculture Fund (NYSEArca: DBA) and rolled the proceeds into PowerShares DB Oil Fund (NYSEArca: DBO).
Trading volume in oil ETFs exploded Wednesday as crude futures fell sharply for the third straight session. [Oil ETFs Plummet 7% on Week as Volume Spikes]
Trading spreads remained tight in the two commodity ETFs amid the heavy volume and volatility.
The DBA/DBO swap is another example of hedge funds and institutions turning to ETFs for large trades, and their comfort in the products’ liquidity and tight spreads.
It’s an interesting trade. A large institution appears to be booking a profit in the agriculture fund (DBA) after the summer rally, and rolling into the oil ETF (DBO) on this week’s dip.
PowerShares DB Agriculture Fund