ETF Chart of the Day: Quivering Qs

There seems to be some trepidation in the Nasdaq 100 at least concerning recent options trading in the largest tracking ETF there, QQQ (PowerShares QQQ, Expense Ratio 0.20%). Yesterday we saw some nibbling in July 105 puts, and with QQQ trading with a $108 handle currently, these traders would need a greater than 3% pullback in the ETF in order for these options to be in the money.

The top holdings in the Tech heavy QQQ are of course AAPL (14.57%), MSFT (7.38%), AMZN (3.83%), GOOG (3.49%), and FB (3.40%). Interestingly, these July options expire before any of these bellwethers report quarterly corporate earnings, as we see AAPL is slated to release their number on 7/22/15, MSFT on 7/21, AMZN 7/23, and FB 7/22.

Only GOOG is scheduled to release their earnings before these July options expire, so the put buying is likely not an “earnings catalyst” play but instead a bet on a pullback for other reasons in the Nasdaq 100.

QQQ has not traded as low as a $105 handle since early April , so it would take quite a bit for it to get down to those levels once more, but the market certainly has been indecisive in recent sessions so it makes sense to us why some may be looking to play this segment of the market from the bearish side if not simply hedge longs here.

This said, those using options for these reasons would also likely naturally be attracted to inverse and leveraged inverse alternatives in this segment for short term directional trading strategies and/or aggressive hedging needs.

Specific ETFs to mention here are PSQ (ProShares Short QQQ, Expense Ratio 0.95%), QID (ProShares UltraShort QQQ, Expense Ratio 0.95%), and SQQQ (ProShares UltraPro Short QQQ, Expense Ratio 0.95%). From a fund flows standpoint, this space has been rather quiet, as QQQ has only seen $100 million trickle out of the fund in the trailing one month period, which is notionally very small for the ETF given its $38 billion asset base.