Short sellers increased their bearish bets on the largest exchange traded fund tracking U.S. financial stocks in November with many traders looking for more downside from the sector on Europe’s debt woes, according to a report.
The $5.5 billion Financial Select Sector SPDR (NYSEArca: XLF) is down 20% year to date and the ETF is trading near its 50-day moving average. Investors who short an ETF make money when the shares decline.
“The number of XLF shares being shorted jumped by 36% last month, a reversal after short interest fell almost 18% in October,” Index Universe reported, adding that short interest data tends to lag and have other flaws, but is a decent market sentiment gauge. “The percentage of XLF’s short interest relative to its total outstanding float meanwhile rose to 71% from 42% in October.”
The ETF’s top holdings are Wells Fargo (NYSE: WFC), Berkshire Hathaway (NYSE: BRK-B ), JP Morgan (NYSE: JPM), Citigroup (NYSE: C) and Bank of America (NYSE: BAC).
In the options market, the financial ETF has seen bearish put buying this week that could be investors speculating on a decline or hedging long positions, said Paul Weisbruch, head of ETF/options sales and trading at Street One Financial.
Financial Select Sector SPDR
Full disclosure: John Spence owns XLF.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.