ETF Trends
ETF Trends

We have seen bullish options trading in the largest ETF for consumer staples, the $6 billion Consumer Staples SPDR (NYSEArca: XLP).

This sector ETF is generally considered “defensive” in that it owns lower volatility large cap names that have traditionally distributed steady cash dividends to investors. Names like PG, KO, PM, WMT, and MO dominate the top five holdings in XLP for instance.

Other ETFs devoted to this sector include VDC (Vanguard Consumer Staples), IYK (iShares DJ U.S. Consumer Goods Sector), FXG (First Trust Consumer Staples AlphaDEX), RHS (Guggenheim S&P 500 Equal Weight Consumer Staples), and PSL (PowerShares Dynamic Consumer Staples) and given the bullish options flow and sentiment in XLP, these funds may also see increased activity in the near term.

Similarly, related ETFs in terms of their underlying index “baskets” looking like that of XLP include USMV (iShares MSCI USA Minimum Volatility) and SPLV (PowerShares S&P 500 Low Volatility Portfolio) and both of these funds have been
enormously popular with investors in 2012, growing to $375 million and $2.4 billion respectively (note that SPLV launched in May of 2011 and USMV in October of 2011).

Since these Consumer Staples based equity ETFs are based on different underlying indices and have different investment approaches (i.e. XLP is market cap weighted and large cap oriented whereas FXG is equal weighted and has more of a “mid cap” bias for example), returns over time will certainly differ and the funds should be investigated by portfolio managers on an individual level to determine which ETF or ETFs are the best fit.

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