ETF Chart of the Day: Not Gushing for Energy ETFs

This morning we mention recurring put buying in XOP (SPDR Oil & Gas Exploration & Production, Expense Ratio 0.35%), a theme we have mentioned in the past several months as the sector continues to erode lower.

This sector oriented ETF has now traded down in five of the past seven trading sessions including today, only receiving small respite this morning and still at multi-year lows. Of course it is not alone in its woes, as spot Oil prices themselves have suffered greatly, seemingly day after day throughout the month of July, where any rally is short lived and an exception, and Oil and Energy Services and Exploration names alike have simply been punished basically through May.

XOP is in fact the largest ETF in the sub-category of “Oil & Gas Exploration & Production,” with approximately $1.3 billion in assets under management at the moment, and in spite of poor performance year to date it still has managed to attract more than $550 million in new assets.

However, the September 39 put buying with the product now trading with a $39 handle and at multi-year lows should be noted, as well as the very heavy trading volume in the product that has prevailed now for the entire month of July. In a well-timed note from ETF issuer Direxion this morning that caught our attention, they draw attention to two of their leveraged products that are specific to the Oil & Gas Exploration &Production space, the well named GUSH (Direxion Daily S&P Oil & Gas Exploration & Production Bull 3X, Expense Ratio 0.95%) and DRIP (Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X, Expense Ratio 0.95%).

Like XOP, these two products track the same S&P Oil & Gas Exploration & Production Index, and at these levels in XOP, should undoubtedly attract the interest of traders looking to aggressively
position or hedge themselves in the sector. XOP as we have mentioned in the past incorporates a modified equal-weighted methodology so that no one holding becomes the obvious lion’s share of the portfolio, and when looking at current top holdings in the ETF we see the following: 1) MHR (2.03%), 2) PBF (1.54%), 3) VLO (1.53%), 4) ALJ (1.53%), and 5) HFC (1.51%). GUSH and DRIP are still rather new to the marketplace, having debuted on May 28, 2015, and thus their asset levels and average daily volumes are still quite low. This said, when glancing briefly at a chart of either product, one can see that the trading interest in these has stepped up considerably just in recent days given the volatility and interest in the sector at the moment.