Financial Sector’s Sudden Downturn Brings Bearish ETFs Into Focus

Lately, we have seen some near term resistance in the Financial sector, which has been one of the best performers since Trump’s election as President.

The benchmark ETF XLF (SPDR Financial Select Sector, Expense Ratio 0.15%, $22.4 billion in AUM) has attracted a massive over $7.4 billion in new assets since November of last year. XLF has basically been in a bull-market since the election, with returns nearing 20% versus the broad market S&P 500 Index’s return of about 5.92% during this time frame.

The sector is however experiencing a drawdown today post the MLK holiday, and we saw some well-timed near term put buyers in XLF late last week involving the January 23.50 strikes. These options notably expire this coming Friday, and the sector is down more than 1.5% in early trading today after reversing sharply from new highs during Friday’s session with a weak close.

XLF-2017-01-17

Levered “Bear” products are in this space are getting a nice lift today, and may continue to see heavier than normal action given the presence of these very near term put buyer in XLF in this compressed holiday trading week.

FAZ (Direxion Daily Financial Bear 3X, Expense Ratio 0.95%, $263 million in AUM), SKF (ProShares UltraShort Financials, Expense Ratio 0.95%, $42 million in AUM), SEF (ProShares Short Financials, Expense Ratio 0.95%, $23 million in AUM), and FAZZ (Direxion Daily Financial Bear 1X, Expense Ratio 0.45%, $1.9 million in AUM) will be on our dashboard all week as a result.

The Financial Select Sector SPDR Fund (NYSE:XLF) was trading at $23.15 per share on Tuesday morning, down $0.36 (-1.53%). Year-to-date, XLF has declined -0.43%, versus a 1.36% 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 39 ETFs in the Financial Equities ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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