Volatility has returned to Small Cap equities, as we note the significant intraday volatility that occurred in IWM (iShares Russell 2000, Expense Ratio 0.24%) that we point out in our Options recap this morning as well.
IWM actually has a concerning looking chart, with a $116 handle earlier in the session last Friday only to close in the $113s, and sure enough IWM put buyers surfaced. October 111 strikes were in decent play on Friday and this morning we see additional weakness, with IWM gapping below its 200 day MA for the first time since early August, and options players clearly foresee additional potential downside here.
Year to date, IWM has seen a notable $2.2 billion flow out of the fund (asset base is $24.6 billion). Well diversified due to its nature, as we have documented before, a fresh look at the top underlying index holdings within IWM shows us ITMN (0.42%), PBYI (0.35%), ISIS (0.28%), WEX (0.26%), and KOG (0.25%).
Notably, three of the top five names are Biotech/Pharma related, with ITMN and PBYI acting as high flyers in 2014, ITMN because of the pending Roche acquisition and PBYI on surprise, but successful results of its breast cancer drug product.
PBYI has been mentioned as a potential acquisition target on the street over the past month or so as well. IWM is classified as “Small-Cap Blend Equity), and the largest such ETF in the U.S. listed landscape.
Some of the largest U.S. Small Cap funds that should be monitored closely here on the long side include IJR (iShares Core S&P Small Cap, Expense Ratio 0.17%), VB (Vanguard Small Cap, Expense Ratio 0.09%), and SCHA (Schwab U.S. Small Cap, Expense Ratio 0.08%) and it is worth noting that between IWM and IJR, iShares commands the #1 and #2 slots in the space in terms of AUM, and a collective amount of about $38 billion (total assets in the top 5 are about $50 million).
iShares Russell 2000 ETF
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
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