A Rising Tide of ETF Inflows for “SPY” ETF

When the markets are fed heavy servings of volatility, it helps to have liquidity when it comes to exchange-traded funds (ETFs). For the self-styled ETF tactician, one of the best funds for liquidity is the SPDR S&P 500 ETF (NYSEArca: SPY).

Lately, it’s been a magnet for traders and investors alike with a recent influx of capital. Per an article by BNK Invest, “we have detected an approximate $6.5 billion dollar inflow — that’s a 3.2% increase week over week in outstanding units (from 891,680,000 to 920,180,000). The chart below shows the one-year price performance of SPY, versus its 200 day moving average:”

“Looking at the chart above, SPY’s low point in its 52-week range is $221.96 per share, with $339.08 as the 52-week high point — that compares with a last trade of $226.96,” the article noted. “Comparing the most recent share price to the 200-day moving average can also be a useful technical analysis technique.”

Being the biggest also allows it to be the most liquid so investors are never hard-pressed for volume when looking to buy or sell SPY. For traders, it means they can get in and out with ease, but it could come at a cost as seen in last week’s trading session when markets were fluxing up and down with huge volume.

Talk about turning up the volume, check out the chart below:

SPY Chart

SPY data by YCharts

When you’re one of the biggest, it puts a target on your back. In the case of SPY, investors looking at the fund as a buy-and-hold strategy have to be prepared for major swings as the market reacts to this coronavirus-laden atmosphere.

Any sliver of news, good or bad, could send SPY roaring up or down.

“Everyone knows the SPDR S&P 500 ETF (SPY),” wrote David Nadig, ETF Flows chief investment officer and research director. “On many days, it’s literally the most liquid security in the world.  Over the last five days, it’s averaged almost $85 billion in trading. And we’re all just used to it trading ‘perfectly,’ a penny wide, right on fair value, all day, every day.”

“But with the kinds of market stresses we’ve seen recently, virtually every security that is generally used in Delta-one arbitrage (that is, trading the gaps between two securities that provide theoretically identical exposures, like a basket of 500 S&P stocks, and an ETF that holds the same), is getting tested, and we’re finding out, more and more, that liquidity has a price,” Nadig added.

For more market trends, visit ETF Trends.