At this point, it may seem like piling on, but it can not be ignored that of the 125 exchange traded funds that hit new 52-week lows on Thursday, nearly 30 were explicit plays on oil or the energy sector.
Making matters worse is that that group of 30 excludes a raft of country-specific, international and fixe income ETFs with heavy exposure to oil prices. For example, the Market Vectors Russia ETF (NYSEArca: RSX) slipped to its lowest levels since April 2009 as traders snatched up January $12 puts on an ETF that closed at $16.21. [Options Traders Bet on Big Russia Declines]
Other new low offenders from Thursday that are not dedicated oil funds include familiar names such as the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ), iShares MSCI Mexico Capped ETF (NYSEArca: EWW) and the Market Vectors-Coal ETF (NYSEArca: KOL).
Some traders are betting on more energy sector declines and if they are correct in their wagers, that will be bad news not only for the aforementioned ETFs, but usual energy suspects such as the Energy Select Sector SPDR (NYSEArca: XLE) and the Market Vectors Oil Service ETF (NYSEArca: OIH). [Oil Services ETFs Need Help]
“The average shares out on loan for the energy companies in the S&P 500 hit 3.25% on Tuesday. That’s just under this year’s high point on Nov. 6., back when oil was trading above $77 a barrel, and is a sign that short sellers believe the roughly 20% drop in the energy stocks over the past three months has more room to run,” reports Erik Holm for the Wall Street Journal, citing Markit data.
The most shorted energy stocks are found on the rosters of OIH and the iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ) due in part to traders betting that a November dividend suspension from SeaDrill (NYSE: SDRL) was not a one-off affair. [Oil Services ETFs Wait on Next Dividend Cut]