ETF Chart of the Day: Finicky Financials

Financials continue to catch a bid even at these levels, as we have seen some interest in XLF upside calls (December 25) with the ETF trading at about $24.50 currently.

The activity is clearly linked to larger inflows in XLF, topping more than $1 billion in recent days (total asset base of the fund is $19.1 billion), with the ETF trading near multi-year highs once again. XLF has a pronounced advantage over smaller funds in the space in terms of its asset size, with the next closest competitor KBE (SPDR KBW Bank, Expense Ratio 0.35%) having approximately $2.6 billion in AUM.

Other notables in terms of larger funds in the space that would potentially be sensitive to the activity we have seen in XLF lately are VFH (Vanguard Financials, Expense Ratio 0.19%), KRE (SPDR KBW Regional Banking, Expense Ratio 0.35%), and IYF (iShares U.S. Financial Sector, Expense Ratio 0.46%), all having amassed more than $1 billion and in some cases north of $2 billion in assets over time.

FAS (Direxion Daily Financial Bull 3X Shares, Expense Ratio 0.95%) has become a major player in the Financial Equity space as well, with an asset level north of $1.2 billion currently, although seeing net outflows >$400 million year to date which looks like profit taking in bullish positions in the sector.

Like most 3X products, assets under management in this and its sister ETF FAZ (Direxion Daily Financial Bear 3X Shares, Expense Ratio 0.95%) which also sees a lot of daily traffic although having lower AUM levels, can swing largely in short periods of time due to the nature of short term technical position trading (and subsequent profit taking or stop losses).