XLF (SPDR Financials Select Sector, Expense Ratio 0.16%) September 24 put trading caught our attention from Friday, and the sector is notably lower today with XLF trading with a $23 handle. Four of the five top weightings in the ETF have reported their quarterly earnings results already, leaving the top weighted name still to report (BRK.B (2/6)).

XLF itself has lost more than $800 million in assets via redemption activity in recent sessions and it is not alone in its trend of recent outflows. Related ETFs IYF (iShares U.S. Financials, Expense Ratio 0.46%) have seen >$500 million leave the doors recently via redemptions and FXO (First Trust Financials AlphaDEX, Expense Ratio 0.70%) likewise has seen >$400 million flow out.

Interestingly, we also saw put trading in KRE (SPDR KBW Regional Banking, Expense Ratio 0.35%) involving February 37 puts which is notably purely on the fact that options in this name do not trade regularly, much less in any kind of notable size. KRE has suffered outflows lately too losing more than $460 million since the first of January (asset base is $1.6 billion currently).

It is hard to pinpoint exactly why investors have been bailing from Financials based ETFs lately other than the possibility that some are simply disappointed with earnings from the group and had perhaps hoped for better
quarters.

Financial “Bear” ETFs should remain on screens in the near term including the likes of FAZ (Direxion Daily Financial Bear 3X, Expense Ratio 0.95%) which is notably smaller in AUM size ($253 million) than its bull companion FAS (Direxion Daily Financial Bear 3X, Expense Ratio 0.95%, $1.46 billion). To a lesser degree funds like SKF (ProShares UltraShort Financials, Expense Ratio 0.95%) may also see upticks in activity in the near term.

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