U.S. Markets closed

ETF Chart of the Day: Oil and Gas Exploration, Production


We saw large bearish put activity yesterday in XOP (SPDR Oil & Gas Exploration and Production) , which has sold off sharply in the past five sessions after nearly touching its 50 day moving average and then failing to break out further.

This options trading indicates investors still believe this sector ETF may have more room on the downside. Specifically, the November 52 puts were sold out and the December 50 puts purchased, extending downside protection for this investor that is likely long the sector.

Volume has also spiked recently in this specific ETF during the recent swoon in equity markets in general. After recently trading along its 200 day MA line ($53.56 currently), XOP has given up ground in recent days amid the put activity, trading as low as $50.51 just yesterday.

XOP has an equal weighted bent, and thus is not overexposed to mega or large cap integrated oil names such as XOM or CVX for example. Instead, top components in the ETF currently are MUR, GPOR, COG, EQT, and PSX.

Other ETFs that may be in focus in the near term especially if the sector continues to weaken include IEO (iShares DJ U.S. Oil & Gas Exploration & Production) and PXE (PowerShares Dynamic Energy Exploration & Production).

IEO tracks a Dow Jones index, and has a much different weighting methodology than XOP, using a market cap weighted approach as well as exposure to a “different” segment of the Gas/Exploration.

Top holdings in the ETF are currently OXY (14.57%), APC (7.83%), APA (7.37%), EOG (7.16%), and PSX (6.73%). PXE on the other hand uses a proprietary methodology that screens stocks in the Exploration/Production space by company fundamentals including growth, stock valuation, investment timeliness, and risk measures.

PXE also follows an equal weighted approach like XOP. Currently, top holdings in PXE are PSX (5.21%), HES (5.02%), MPC (4.98%), XOM (4.95%), and CVX (4.91%). Year to date, PXE has rallied 12.22% in comparison to IEO losing 1.99% and XOP down 2.33% during this same time period. In the trailing one year period the results are similar, with PXE rising 5.30% versus IEO (-8.88%) and XOP (-6.54%).

PowerShares Dynamic Energy Exploration & Production


For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.