Drilling down on expiration-week expectations for JNK, XLV, XLK, and GDX
It's been an eventful stretch for the stock market lately, with a remarkable nine-year rally in the Dow freshly marred by a rare streak of three straight 1% down days. The choppy price action and ramped-up volatility have rattled many investors right out of equities; etf.com data shows that the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY) registered net outflows in excess of $18 billion during the one-month period ended March 6.
However, SPY wasn't the only exchange-traded fund (ETF) to feel the cold chill of massive outflows over this time frame. As we approach standard March options expiration, here's a look at what the open interest configurations are saying about a few of the least popular ETFs on Wall Street (as well as one fund that's captured traders' hearts over the last month, albeit unsurprisingly).
The SPDR Bloomberg Barclays High Yield Bond ETF (NYSEARCA:JNK) clocked outflows of about $1.49 billion over the last month, and the junk-bond tracker enters the week trading just below emerging resistance at its steeply descending 30-day moving average.
From an options perspective, though, JNK is comfortably north of peak front-month put open interest at the March 35 strike, with 22,532 contracts outstanding -- making it the ETF's No. 2 overall open interest strike. Most of this open interest was bought to open, per data from the major options exchanges, which means JNK could find some options-related support at this strike in the days ahead.
The past month's worth of net outflows from the Health Care Select Sector SPDR ETF (NYSEARCA:XLV) totaled $994.50 million, but the fund has repeatedly found support in 2018 around its year-to-date breakeven level of $82.68. And last Friday, XLV broke out above its 50-day moving average, and settled at $86.51 -- meaning that all 13,004 contracts at the popular March 85 call strike are now pretty convincingly in the money.
However, the $86.50 level acted as a brick wall overhead in late February, and XLV barely eked out a close above this area in Friday's session. With the prospect of another pullback from this familiar resistance back on the table, traders who played those XLV March 85 calls shouldn't consider this call-heavy strike thoroughly vanquished just yet.
Investors pulled about $1.01 billion out of the Technology Select Sector SPDR Fund (NYSEARCA:XLK) in the last month, even as the tech fund -- like its counterpart, the PowerShares QQQ Trust (QQQ) -- bounced sharply from its 160-day moving average. On the heels of Friday's freshly set closing high at $70.51, it should be interesting to see if XLK can extend its move more meaningfully beyond the March 70 strike, which carries one of the most significant call accumulations -- and call/put skews -- among all near-the-money strikes.
During the one-month stretch ended last Tuesday, the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) attracted inflows of $913.24 million -- the seventh largest creation for the period among all funds tracked by etf.com. Options traders have also gone "all in" lately; over the past 10 days, GDX has racked up a call/put volume ratio of 4.17, according to buy-to-open data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks higher than 100% of other such readings taken over the past year, revealing peak levels of bullish speculation among options buyers.
A short-term GDX rally may yet be in the cards, as the fund enters expiration week fresh off a test of the $21 region, which has marked lows on multiple occasions over the past year -- and GDX has room to rally about 16%, from Friday's close at $21.57, before knocking on the door of peak front-month call open interest of 70,103 contracts at the deep out-of-the-money March 25 strike.
Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, March 11.