With the Nasdaq Composite rising and closing above 5,000 yesterday, it is hard to ignore some upside call positioning in QQQ (PowerShares QQQ, Expense Ratio 0.20%) involving May 113 calls which tracks a sub-index of the Composite, the Nasdaq-100.
Based on current levels in QQQ the 113 strikes are approximately 4.6% out of the money but seemingly realistic given the options do not expire for more than two months from now.
Additionally, top weighted members of QQQ, AAPL (>14.5%), MSFT (>7%), GOOG (>3.8%) & GOOGL (>3.2%), FB (>3.5%), and AMZN (3.47%) all report their next quarterly earnings results within the expiration of these May options. FB releases their quarterly number on 4/22 while AAPL and MSFT are slated to release results on 4/23/15.
Google reports on 4/30 as does AMZN. To say that it is a crowded earnings/event calendar at the end of April for the Large Cap Technology sector would be an understatement. Now the QQQ which represents the Nasdaq-100 Index is not purely “Technology” exclusive, is certainly Tech heavy (and getting heavier as market caps in the sector rise relative to everything else) at >56% of the underlying index.
If we are looking at the QQQ and related options ahead to earnings season we should also hone in on Technology sector specific funds which of course would be affected here and presumably in heavy rotation over the next two months.
XLK (SPDR Technology Select, Expense Ratio 0.15%), is the largest fund in the sector with north of $13.2 billion in assets under management, followed by VGT (Vanguard Information Technology, Expense Ratio 0.14%, $7.3 billion in AUM), IYW (iShares U.S. Technology Sector, Expense Ratio 0.43%), and FDN (First Trust DJ Internet, Expense Ratio 0.57%).
In terms of single stock impact, IYW notably has a greater than 20% weighting to AAPL followed by a >9.8% weighting to its second largest member MSFT, while XLK has a >17.7% weighting in AAPL and a >8.6% weighting to MSFT.
VGT likewise has a >15.2% weighting to AAPL followed by a>8.4% weighting to MSFT. Given the presence of upside call interest here, long levered ETFs like TECL (Direxion Daily Technology Bull 3X, Expense Ratio 0.95%), ROM (ProShares Ultra Technology, Expense Ratio 0.95%), QLD (ProShares Ultra QQQ, Expense Ratio 0.95%), and TQQQ (ProShares UltraPro QQQ, Expense Ratio 0.95%) should be in heavy focus as well.
Powershares QQQ
For more information on Street One ETF market commentary and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com
Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.