The Technology Select Sector SPDR (NYSEArca: XLK), the largest technology ETF by assets, and the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, are among the tech-related exchange traded funds investors are displaying enthusiasm for following a spate of bullish earnings updates from marquee Internet and technology companies last week.
XLK tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500. The ETF includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services. Top holdings include Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT) and Facebook (NasdaqGS: FB).
Technology stocks and related ETFs jumped Friday after Alphabet (NasdaqGS: GOOGL), Amazon (NasdaqGS: AMN), Microsoft (NasdaqGS: MSFT) and Intel (NasdaqGS: INTC) third quarter results impressed traders. Options activity in QQQ and XLK was brisk on Friday.
“Nearly 29,000 XLK options have traded so far — more than four times the expected intraday pace, and volume is on track to settle in the 95th annual percentile. However, puts are outpacing calls by a roughly 2-to-1 margin. Most of the activity appears tied to stock, as those with exposure to tech stocks seek out an options hedge,” according to Schaeffer’s Investment Research.
For the week ended, Oct. 26th, QQQ hauled in over $1 billion in new assets, good for the fourth-largest haul among all US-listed ETFs.
“QQQ options volume is surging, too, with over a million contracts traded — nearly three times what’s typically seen at this point in the day, and pacing in the 99th annual percentile,” noted Schaeffer’s.
Related: Cost-Effective ETF Technology Sector Exposure
Another ETF with large Apple, Alphabet and Microsoft weights is the Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC), which charges barely more than 0.08% per year. With technology historically being a strong performer in the fourth quarter and one of the best sectors in October, now is a good time for investors give FTEC a look.
FTEC features exposure to a wide array of technology companies, including technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.
For more information on the tech sector, visit our technology category.
Tom Lydon’s clients own shares of QQQ, Apple and Facebook.