It is 2015, but some traders are treating exchanging traded funds tracking PIIGS nations as if it is 2010 as renewed fears about Greece potentially leaving the Eurozone are prompting increased bets against other Europe single-country ETFs.
In 2010, the iShares MSCI Italy Capped ETF (NYSEArca: EWI) and the iShares MSCI Spain Capped ETF (NYSEArca: EWP) fell 14.2% and 18.9% as the Eurozone sovereign debt crisis worsened with Greece seen as one of the main culprits. Fast-forward to 2015 and fears are once again rising regarding a “Grexit.”
Just two years after Greece brought the Eurozone to the brink of a full-fledged crisis and stoked speculation that the common currency scheme was close to meeting its demise, Greece’s fractured political system has onlookers mulling the possibility of a Eurozone without the country. Greeks head to the polls on Jan. 25 with Prime Minister Antonis Samara warning that if the opposition Syriza party emerges victorious, a Greek default and Eurozone departure would be the end result. [Greece ETF Pricing in EMU Departure]
The Global X FTSE Greece 20 ETF (NYSEArca: GREK) entered Monday with a 2015 loss of 6%, but traders are also turning bearish on EWI and EWP.
“The price of bearish options versus bullish ones on EWP hit a 20-month high last week, while the cost of the contracts on EWI jumped 27 percent since early December,” reports Inyoung Hwang for Bloomberg.
EWI and EWP are lower by 5.4% and 6.6%, respectively, to start 2015. EWI, the lone Italy ETF, currently trades just under $13, but open interest in the ETF’s January $13 strike puts is nearly triple that of the open interest in calls with the same strike, according to OptionMonster data.
EWP, the largest Spain ETF, currently trades just over $32. Open interest in EWP’s February $32 strike puts is more than eight times the open interest in the calls with the same strike, according to Option Monster.
EWP has been hampered by, among other factors, declines in shares of Banco Santander (NYSE: SAN). Share of the Spanish banking giant are off 22.2% over the past 90 days and some analyst see a dividend cut in the bank’s future. EWP allocates 21.7% of its weight to Banco Santander, about 1,000 basis points more than the ETF devotes to Telefonica (NYSE: TEF), its second-largest holding. [Santander Slump Slams Spain ETF]
Puts on the Italy ETF outnumbered calls by 2.73-to-1, and the ratio for the Spanish fund was 1.88-to-1, according to Bloomberg. Last year, investors added $220.2 million to EWI and $968 to EWP, but departures from the ETFs have recently accelerated. In the fourth quarter, a combined $900.4 million was pulled from EWP and EWI.
iShares MSCI Italy Capped ETF
