Financials continue to be in the spotlight, thanks to their performance since Trump’s election last November but it seems that some market participants are wagering that the sector may be due for a pullback.
While about a month ago or so, we saw nothing but positioning for more upside via calls in NYSE:XLF (SPDR Financial Select Sector, Expense Ratio 0.15%, $25.4 billion in AUM), lately the options flows have been riddled with downside put buyers in spring months (April and May),as well as some upside call selling in April (specifically the April 25 strikes were active last week).
Year-to-date, XLF has still seen strong inflows with more than $1.3 billion entering the fund via creations, but the fund has had trouble eclipsing and holding the $25 mark in recent sessions.
Given the recent bearish appetite expressed in the options markets, including both put buying and spring time upside call selling, it makes sense for us to look closely at “Bear” products that traders and hedgers traditionally use when speculating on downside in Financials. These funds include NYSE:FAZ (Direxion Daily Financial Bear 3X, Expense Ratio 0.95%, $249 million in AUM) and NYSE:SKF (ProShares UltraShort Financials, Expense Ratio 0.95%, $42 million in AUM, which are well off of peak asset levels presently due to the bullish environment that has ensued in Financial equities for at least the past five months.
The Financial Select Sector SPDR Fund (NYSE:XLF) was trading at $24.76 per share on Monday afternoon, down $0.21 (-0.84%). Year-to-date, XLF has gained 6.49%, versus a 6.25% rise in the benchmark S&P 500 index during the same period.
XLF currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 38 ETFs in the Financial Equities ETFs category.