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  • Writer's pictureThe San Juan Daily Star

Regional bank ETF’s options draw defensive plays with earnings ahead

Traders in the U.S. equity options market are guarding against a drop in shares of the biggest regional bank exchange-traded fund, days before reports from lenders are set to kick off the corporate earnings season.

The $3.8 billion SPDR S&P Regional Banking ETF, which tracks regional bank stocks, was recently down 2.3% at $50.56. The S&P 500, by contrast, was down around 0.2%.

The defensive options bets are likely from investors guarding against possible declines following earnings report from the sector, market participants said. JPMorgan Chase, Bank of America and Wells Fargo are all set to report on Friday, with other big banks to post results in the following days.

“If the big banks sneeze, the smaller banks catch cold, so playing defense in KRE is not unreasonable from that viewpoint,” said Steve Sosnick, chief strategist at Interactive Brokers.

While the positioning is not “overwhelmingly” defensive, general investor disinterest in hedging with put options in the broader market may be throwing the bearish trading in KRE into sharper relief, Sosnick said.

On Thursday, some 134,000 KRE options contracts changed hands by 1:30 p.m. (1830 GMT), or 1.8 times the usual volume. Volume in put contracts, typically bought to protect against a drop in a share price, was twice its daily pace, according to data from options analytics service Trade Alert.

The IPO is expected to take place after the Securities and Exchange Commission completes its review process, subject to market and other conditions, the company said.

The company had previously said it was valued at $9 billion, in a 2022 deal to go public via a special-purpose acquisition company. It ended that deal in December 2022. Circle CEO Jeremy Allaire said at the time that he was disappointed that the proposed transaction “timed out,” but that the company still intended to go public.

USDC is the second-biggest stablecoin, after Tether, and the seventh-biggest cryptocurrency overall, according to crypto market tracker CoinGecko. The tokens are backed by cash and cash equivalents, including short-term Treasury bonds.

There are around $25 billion worth of USDC tokens in circulation, down from a peak above $56 billion in mid-2022, according to CoinGecko.

After a period of rapid growth, the crypto industry slumped in 2022 and token prices dropped as investors grew more cautious and various high-profile crypto firms collapsed, including crypto exchange FTX.

Circle announced layoffs in July 2023 and said it had ended investments in non-core business areas.

Circle’s move to become a publicly-traded company comes after a prolonged slump in dealmaking amid high interest rates and market volatility. Clearing firm Apex Fintech confidentially filed for a U.S. IPO in December. Apollo-owned Aspen Insurance has also said it is considering a public offering in 2024.

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