As mentioned in our ETF Options recap this morning, this week we have seen some notable upside call activity in XOP (SPDR Oil & Gas Exploration & Production, Expense Ratio 0.35%) consisting of March 42 strikes trading.
While XOP currently has a $38 handle, making these options more than 8% out-of-the-money, we note that since these are March options there is considerable time left until expiration and XOP has historically been a volatile mover, making these calls worth watching.
XOP has seen net outflows year-to-date of about $74 million and this morning it briefly challenged its 52 week intraday trading high ($39.53 was reached back in mid-October) before regressing a bit.
As one might imagine, XOP is very sensitive to Crude Oil prices themselves and thus the fund has benefited performance wise since about four trading sessions ago when Crude bottomed and then rallied sharply to present levels. XOP is by far the largest way to play the specific subsector of “Energy” equities known as “Oil & Gas Exploration & Production”, as the fund has $2 billion in assets under management, putting it leaps and bounds ahead of the next largest fund in the segment, over IEO (iShares U.S. Oil & Gas Exploration & Production, Expense Ratio 0.43%, $345 million in AUM).
Given the bullish nature of options trading lately in XOP, and we note that when options trade in this segment in general XOP seems to always be the default name that is in play, having a rather liquid underlying options market, we are also watching “Bull” levered GUSH (Direxion Daily S&P Oil & Gas Exploration & Production Bull 3X, Expense Ratio 0.95%, $79 million in AUM) which has attracted some assets in the trailing one month period (over $12 million in) as well as UOP (ProShares Ultra Oil & Gas Exploration & Production, Expense Ratio 0.95%, $1.5 million in AUM) which is considerably smaller than GUSH, and structured as a two times daily leveraged product as opposed to three times.
Employing a modified equal-weighting fund methodology, some of the top holdings in XOP are not exactly household names when others are large mainstream players in the segment, as the fund has considerably exposure to Mid-Caps (37%), Small-Caps (31%), and a 21% slug invested in Large-Caps.
XOP’s top five look like this: 1) WNR (2.31%), 2) WLL (2.28%), 3) VLO (2.28%), 4) TSO (2.27%), and 5) PSX (2.20%).
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.
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.