There seems to be some trepidation in the Semiconductor sector heading into core earnings season, at least judging from recent options activity in SMH (Market Vectors Semiconductor, Expense Ratio 0.35%) which is the largest Semi based sector ETF in the U.S. listed universe.

We have seen some nibbling at August 50 puts although the ETF has rallied with the general market from recent lows touched last week, and is now trading with a high $53 handle. SMH is rather highly concentrated in two single equity names as we have mentioned in the past, with INTC making up 18.99% of the portfolio as the top weighted member, followed by Taiwan Semiconductor at 15.5%.

INTC reports earnings tomorrow after the close of trading while TSM reports the following morning, 7/16/15, so it is very feasible that the put trading is a bearish bet ahead of expected earnings.

Other weightings in the ETF, ranked #3 through #5 are ASML (6.07%), TXN (5.05%), SWKS (4.59%). We should closely watch other prominent ETFs in the Semi space given the eclipse of earnings season here as well including SOXX (iShares PHLX SOX Semiconductor Sector, Expense Ratio 0.47%) and XSD (SPDR S&P Semiconductor, Expense Ratio 0.35%) which have $371 million and $191 million in assets under management as compared to SMH’s $426 million.

Year to date, SMH has leaked out about $35 million in assets via redemption activity, while SOXX has fared worse, losing more than $198 million to outflows and XSD has seen very flat flows, with only $4 million leaving the fund during this time period.

Given the bearish tone in the recent options activity in SMH ahead of earnings, we should also focus on SOXS (Direxion Daily Semiconductor Bear 3X, Expense Ratio 0.95%) which in spite of only having about $25.7 million in assets under management at the moment, has seen a notable uptick in trading volume in recent sessions as directional traders tend to utilize this in times of higher volatility in the sector.