Options Activity Indicates Hedging Taking Place In Emerging Market Funds

Analyst Paul Weisbruch of Street One Financial brings us his daily fund flows update, which today looks at some interesting outflows from the world’s largest ETF just before the Fed commentary yesterday, and some apparent emerging markets hedging taking place in the options markets.

Yesterday’s trading flew off of the rails at around 2:30 PM yesterday, well after the FOMC minutes were initially released and initially digested in what looked like an orderly manner. The SPX, which traded as high as 2378 for much of the morning session, closed down on the day, but has seen a slight lift on Thursday, with the index maintaining its posture above the 50 day MA level again.

Notably, before the release of FOMC Minutes yesterday, we saw about $5 billion leave SPY late in Tuesday’s trading session, which makes one wonder.

Elsewhere, we mentioned Emerging Markets ETFs like EEM and IEMG in recent recaps as being some of the largest recipients of end-of-quarter inflows in the ETF marketplace, and EEM options have been active this week with some hedging occurring. We have seen the May 37 puts trade in decent size this week, and given EEM’s $39 handle, these options are considerably out-of-the-money, but they do have more than a month left until expiration.

Investors will note that EEM last traded in the $37 for a sustained period of time way back in January.

The iShares MSCI Emerging Markets Index ETF (NYSE:EEM) was trading at $39.47 per share on Thursday morning, down $0.04 (-0.10%). Year-to-date, EEM has gained 12.74%, versus a 5.36% rise in the benchmark S&P 500 index during the same period.

EEM currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 77 ETFs in the Emerging Markets 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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