Master Limited Partnerships have caught a bid recently and rocketed from the trading lows touched just seven trading sessions ago, and on top of this rally we are now seeing options activity in AMLP (Alerian MLP ETF, Expense Ratio 5.43%), the largest MLP focused ETF listed in the U.S. at the moment.
AMLP has a notable $8.6 billion in assets under management including more than $350 million that has entered the fund via creation activity just year to date, and we have seen turnover in what are infrequently traded options in the name lately.
The October 17 calls traded more than 22,000 times yesterday versus scant open interest and these options are approximately 6.25% out of the money at current levels in AMLP. We look at current top holdings in the product that are listed as follows: EPD (10.08%), MWE (8.58%), ETP (7.47%), MMP (7.35%), and PAA (7.33%). EPD reports quarterly earnings on 7/30, MWE and ETP on 8/5, MMP on 8/6, and finally PAA on 8/4.
Needless to say, these October options capture the corporate earnings reporting cycle for these and other names in the AMLP basket if that’s perhaps what the call buyers are looking at. Similarly, the options trading could simply reflect further bullish sentiment in a sector that has been beaten down considerably along with the price of Crude Oil and other Energy commodities, as AMLP is still down nearly 9% year to date even given the recent bounce.
AMLP is not the only ETP in the MLP space which from an investment standpoint, has become a rather viable and popular segment among institutional managers as well as ETF strategists whom want a part of the space, in addition to attracting a fair amount of retail assets.
AMJ (Alerian MLP Index ETN, Expense Ratio 0.85%) is the second largest product in the space, and importantly is an ETN and not an ETF like AMLP, so therefore may attract different types of investors whom are comfortable with ETN investing. MLPI (E-TRACS Alerian MLP Infrastructure ETN, Expense Ratio 0.85%) is the third largest product in the segment with about $2.4
billion in AUM, while EMLP (First Trust North American Energy Infrastructure ETF, Expense Ratio 0.95%) is the next in line in terms of asset size, with more than $1.1 billion in AUM.