The XME (SPDR S&P Metals & Mining, Expense Ratio 0.35%, $913 million in AUM) has turned in a stellar year thus far in terms of delivering over 108% return in terms of year-to-date performance and pulling in more than $325 million in new assets via creations, and we have seen an uptick in options volume this week.
December 32 strike calls which are slightly out-of-the-money at today’s levels were sold in decent size (over 80,000 contracts traded versus open interest of only about 14,000) and it appears to be a holder of the ETF collecting premium and perhaps speculating on limited additional upside in this ETF headed into the end of the year.
We point out that XME benefitted greatly from a rally in Precious Metals that occurred throughout most of 2016 up until late September, where notably Gold and Silver spot prices were blitzed down to today’s levels. On the other hand, Industrial metals have rallied furiously since Trump’s Presidential election, for example if we look at JJC (iPath Bloomberg Copper Subindex Total Return ETN, Expense Ratio 0.75%) and the broader DBB (PowerShares DB Base Metals, Expense Ratio 0.75%, $292 million in AUM), both funds have surged on higher prices in industrial metals on an anticipated pickup in investment in infrastructure from the new administration.
A second “Metals & Mining” fund in the space, PICK (iShares MSCI Global Metals & Mining Producers, Expense Ratio 0.39%, $296 million in AUM) has benefitted from a rally in the sector in 2016 as well, and has picked up more than $139 million in new assets via creation.
Back to XME, which we have of course covered in the past in this segment, the fund follows a modified equal-weighted index methodology and owns twenty-six individual equities that operate in the Metals and Mining space. Top holdings at the moment are as follows: 1) AKS (5.55%), 2) STLD (5.06%), 3) WOR (5.03%), 4) X (5.02%), 5) FCX (4.81%), 6) SWC (4.75%), 7) HL (4.67%), 8) NUE (4.61%), 9) CMC (4.59%), and 10) CMP (4.43%).
PICK on the other hand follows a market capitalization weighted scheme and also is globally focused (XME has a 96% weighting to U.S. listed names as compared to PICK’s 15% weighting to the U.S.) and thus top holdings (which are all ordinary shares that trade overseas) look much different: 1) BHP Billiton Ltd (9.47%), 2) Rio Tinto PLC (7.19%), 3) Glencore PLC (6.12%), 4) BHP Billiton PLC (5.35%), and 5) Anglo American PLC (3.15%).
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.
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.