Bearish ETF Bets Soar as Canada Stocks Climb Back Toward Record
By Eric Lam
As Canadian stocks climb back toward an all-time high, concern that oil?s collapse will take a toll on the economy is sending investors in search of protection.
Bearish bets for the iShares Standard & Poor?s/TSX 60 Index exchange-traded fund, Canada?s largest ETF by assets, have surged this year to as much as nine times the number of calls. The ratio reached the highest level ever on March 20, according to data compiled by Bloomberg.
Investors remain wary amid a 3.2 percent rally in the Canadian equity market this month as energy companies, the worst performers in the broader S&P/TSX Composite Index last year, have rebounded 2.9 percent in 2015. A more than 50 percent drop in crude prices coupled with a potential housing bubble still could damage the nation?s economic recovery, according to Nick Piquard, an options strategist at Horizons ETFs Management Canada Inc. in Toronto.
?We have significant commodity exposure and an expensive housing market,? said Piquard, whose firm oversees about C$4.4 billion ($3.5 billion) in ETF products. ?With energy slowing down, it?s been a huge driver for our growth and our jobs the past few years.?
The S&P/TSX climbed for seven straight days through last Friday, the longest winning streak since June, when oil prices began their slide into a bear market. A 5.1 percent rally since a low on March 10 has put the Canadian equities benchmark within 1.8 percent from recapturing an all-time high. The index dropped 0.1 percent to 15,361.48 at 9:54 a.m. in Toronto.