Long and Short ETFs To Play On Positive Banking News (SPY, XLF, FAZ)

I urge individual investors to save at least 10% of everything they earn for a  rainy day.  In an effort to increase the resilience of central banks a Group of 20 leading industrialized and developing nations have agreed to increase their reserve requirements to 7%.  Basically the central banks are going to required to have more actual cash on hand.

On Monday morning U.S. banking stocks like JP Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) improved on the positive news.  ETF investors can play the positive news in the banking sector in multiple ways:

Diversified Approach

1. SPDR S&P 500 (NYSE:SPY)

The SPY ETF, which tracks the performance of the S&P 500 has just over 16% of its $70.9 billion in assets allocated into financial services.  Leading companies in the index include (NYSE:JPM), Bank of America (NYSE:BAC) and (NYSE:WFC).

Concentrated Approach

2. Financial Select Sector (NYSE:XLF)

The (NYSE:XLF) ETF, which tracks the performance of the large banks and financial services companies like (NYSE:JPM), Berkshire Hathaway, (NYSE:BAC) and Citigroup (NYSE:C), is another option to explore.  The $50.9 billion XLF fund has 80 holdings in total and a low expense ratio of 0.22%

Inverse Approach

3. Direxion Daily Financial Bear 3X Shares (NYSE:FAZ)

Positive news for the banking sectors means that an inverse fund like (NYSE:FAZ) will go down in value on days like today.  Near midday the (NYSE:FAZ) fund was down -4.55% while the (NYSE:XLF) fund was up 1.72%. My favorite approach of the 3 listed in the inverse approach because I’m a fan of investing when investments are out of favor.  While the good news in the banking sector was good for a short run up, I’m remaining bearish on the banking sector for now.

 Written By Gregory S. Davis From ETF Ready

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