Bearish Options Bets Seen For Red-Hot India Earnings ETF

May 5, 2017 1:43pm NYSE:EPI

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We have seen some appetite late in the week for downside puts in the second largest India equity based ETF in the U.S. listed landscape, EPI (WisdomTree India Earnings, Expense Ratio 0.84%, $1.6 billion in AUM), involving the July 23 strikes.


While EPI is presently trading well above $24, putting these options more than 7% out-of-the-money, we are still taking note of the trading simply because the Indian stock market has had a nice run since March and the options do not trade regularly in this name.

Year-to-date, EPI has outpaced a broader proxy such as the MSCI Emerging Markets Index by over 800 basis points, so those speculating on a potential pullback — if not simply hedging long positions — could potentially be eyeing up these, and other downside puts.

Since the start of 2017, EPI has attracted about $55 million in net inflows on its strength, but it is still the second largest fund in the space behind INDA (iShares MSCI India, Expense Ratio 0.71%, $5 billion in AUM), which has fared well in its own right, packing in over $585 million in YTD creations. Unfortunately there is no “Bear” levered ETF in the India space presently, for in the midst of put buying, we would generally keep a close eye on any of the Bear funds if they existed.

Direxion does offer the three times levered INDL (Direxion Daily India Bull 3X Shares, Expense Ratio 1.23%, $104 million in AUM), however, and this fund has seen roughly flat fund flows year-to-date. Getting back to EPI, we see the highest industry concentrations within the fund as follows: Financials (25%), Energy (21%), and Technology (16%), followed by lesser weightings to other industry sectors.

There are two hundred forty-eight names within the portfolio and according to fund literature, investors “gain exposure to broad Indian all cap equity of profitable companies” and EPI can be “used to access the Indian markets with a valuation centric approach.”

From an individual name standpoint we see top weightings as follows: 1) Reliance Industries Ltd. (10.81%), 2) Infosys Ltd. (6.54%), 3) Housing Development Finance Corporation Ltd. (6.19%), 4) Tata Consultancy Services Ltd. (3.51%), 5) ICICI Bank (2.66%), 6) Axis Bank Ltd. (2.63%), 7) Bharat Petroleum Corporation Ltd. (2.22%), 8) Indian Oil Corpn Ltd. (2.17%), 9) Oil and Natural Gas Corporation Ltd. (1.94%), and 10) HCL Technologies Ltd. (1.93%).

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The WisdomTree India Earnings Fund ETF (NYSE:EPI) was trading at $24.79 per share on Friday afternoon, down $0.09 (-0.36%). Year-to-date, EPI has gained 22.72%, versus a 6.90% rise in the benchmark S&P 500 index during the same period.

EPI currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #12 of 77 ETFs in the Asia Pacific Equities Ex-China 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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