ETF options volume in addition to activity in linked leveraged ETFs that serve as short term trading tools have both risen lately in the Financial sector in the midst of earnings season.
Top weighted component in XLF (SPDR Financial Select Sector, Expense Ratio 0.16%), WFC (with an approximately 9% weighting) reported quarterly earnings this morning and currently the stock is trading right around its 50 day MA on a more than 1% fall.
October 21 put buyers were around yesterday in XLF, and if not positioning for this apparent softness in WFC stock, they may be playing earnings reports that are expected later next week from other top sector components (#3 weighting JPM (>7.7%), #4 BAC (>5.7%) #5 C (>5.1%). XLF remains a behemoth in terms of assets under management in the Financial Equity segment, with >$18.4 billion in overall AUM currently.
Other notables here however especially in terms of the incoming earnings reports expected by benchmark Bank names include KBE (SPDR KBW Bank, Expense Ratio 0.35%) and KRE (SPDR S&P Regional Banking, Expense Ratio 0.35%), both of which now have greater than $2.4 billion in AUM respectively, making them the second and third largest “Financial Equity” based ETFs in the U.S. landscape.
FAZ (Direxion Daily Financial Bear 3X Shares, Expense Ratio 0.95%) and FAS (Direxion Daily Financial Bull 3X Shares, Expense Ratio 0.95%) will both likely see upticks in volume in the near term as well as aggressive hedgers or speculators may very well enter the market if they sniff out trading opportunities linked to any earnings related volatility.
FAS itself is the fifth largest ETF at the moment across all Leveraged Equity ETFs, as it has $1.1 billion in assets under management at the moment. It has seen assets flow out however to some degree, with the fund losing >$250 million year to date via redemption activity.
If the sector continues to trade lower, as we have seen XLF among some of the weakest sector performers on a relative strength basis lately, it will be interesting to see what holders of the levered bull FAS do, if anything. V FH (Vanguard Financials, Expense Ratio 0.19%), IYF (iShares U.S. Financial Sector, Expense Ratio 0.46%) and FXO (First Trust Financial AlphaDEX, Expense Ratio 0.70%) remain in the forefront as well in terms of ETFs to closely watch in coming days.
Financial Select Sector SPDR
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