The finale of the French presidential election is scheduled for Sunday with centrist Emmanuel Macron and far-right candidate Marie Le Pen facing off. Predictably, that has traders keeping tabs on the iShares MSCI France ETF (NYSEArca: EWQ), the largest France exchange traded fund trading in the U.S.
France, the Eurozone’s second-largest economy behind Germany, is a key component in diversified Europe ETFs. In dedicated Eurozone ETFs, France is usually the largest or second-largest country allocation. In diversified Europe ETFs that hold stocks from nations outside the Eurozone, France is usually among the three or four largest country allocations.
Polls widely show Macron ahead of Le Pen, a result markets appear to favor. The results are seen as a turn against calls for scrapping the euro currency and breaking down the European Union, a scenario widely feared as a big destabilizer for the euro and trading bloc.
“The second round of the French presidential election will be held this Sunday, with centrist candidate Emmanuel Macron and his far-right opponent Marine Le Pen slated to hold a televised debate later today. The results of the initial round of voting in late April sparked a global relief rally in stocks, as the growing fear surrounding the event was unwound. There still seems to be plenty of skepticism surrounding the final result, too, based on the recent options activity in the iShares MSCI France ETF (EWQ) — an exchange-traded fund that tracks mid- and large-cap stocks in France,” according to Schaeffer’s Investment Research.
The $383.4 million EWQ holds 76 stocks and tracks the MSCI France Index. EWQ, which debuted in 1996, allocates 19.6% of its weight to industrial stocks and almost 19% to consumer discretionary names. Financial services and healthcare stocks combine for over a quarter of the ETF’s weight.
“Specifically, over the past 10 trading sessions, options traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.18 puts for each call. What’s more, EWQ’s gamma-weighted Schaeffer’s put/call open interest ratio (SOIR) is docked at a top-heavy 1.65, meaning near-the-money puts almost double calls among options expiring in three months or less. Plus, put open interest on EWQ hit a 52-week peak of 7,401 contracts on Monday, and is currently docked just below here at 7,334,” according to Schaeffer’s.
EWQ has a three-year standard deviation of 14.1%.
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