5 ETFs to Watch Heading Into the 3Q

EFA saw $1.1 billion in net inflows last week, with the fund also in options traders' crosshairs

Jun 27, 2017 at 10:07 AM
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The S&P 500 Index (SPX) is so far boasting a 3% lead in the second quarter, which is set to end at Friday's close. Another quarterly win would mark a seventh straight for the broad-market index, which hit a record high of 2,453.82 on Monday, June 19. Goldman Sachs said this price action is largely due to corporate share buybacks. The brokerage firm also gave credit to the impressive action in exchange-traded funds (ETFs), which scooped up $98 billion in stock over the last three months, and now own around 6% of the total U.S. stock market -- an all-time peak.

XLU, IBB Among Domestic ETFs With Largest Net Inflows

While this activity has slowed in recent weeks, according to ETF.com, there were a handful of domestic ETFs that saw notable inflows last week, including the Utilities Select Sector SPDR Fund (XLU) and iShares Nasdaq Biotechnology ETF (IBB). The ETFs had net inflows of $662.6 million and $687.9 million, respectively, over a time frame that saw XLU drop 1.7% and IBB surge 9.6%. And ahead of a historically strong month for the ETF, IBB hit a 12-month high after the Senate released their Obamacare replacement bill.

Options Traders Blast Booming EFA Shares

However, it was foreign ETFs that have attracted the most attention of late, per ETF.com, with net inflows on the iShares MSCI EAFE ETF (EFA) exceeding $1.1 billion in the week ended June 23. Options traders have been drilling down on EFA, too, with call volume topping out at a 52-week high of 601,996 contracts on June 19 -- 12 times what is typically traded in a single session.

It looks like one trader bought to open a 12,163-contract block of weekly 7/28 67-strike calls for $316,238 ($0.26 premium paid * number of contracts * 100 shares per contract). If this is the case, the call buyer expects EFA to topple $67 by expiration at the close on Friday, July 28. The fund was last seen trading at $65.23, up 13% on the year.

FXI, TUR Could Have Historically Been Strong in July

Looking ahead, big-cap Chinese stocks could garner some bullish attention next month, considering the iShares China Large-Cap ETF (FXI) has averaged a July gain of 3.5% since its inception, according to data from Schaeffer's Quantitative Analyst Chris Prybal. Another global ETF that has put in a historically strong July performance is the iShares MSCI Turkey ETF (TUR), averaging a 5.2% gain.

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