The Global X Social Media Index ETF (Ticker: SOCL) touched fresh record highs on Thursday morning, surprising no one given the top three holdings of the Fund are Hong Kong-based Tencent Holdings (12.678%), Facebook Inc. (12.506%) and LinkedIn Corp. (8.166%), which are up 130%, 160% and 22%, respectively, since this time last year. The SOCL reflects the performance of companies involved in the social media industry, including companies that provide social networking, file sharing and other web-based media applications. Shares in the ETF rose 1.3% today to a new high of $23.00, and have soared approximately 65% since this time last year.
Broader benchmarks for the U.S. stock market have been hitting fresh highs recently, helped in part by the outperformance of social media related stocks. Options activity on the SOCL today suggests at least one trader is picking up some downside protection on the sector in the event the rally in equities hits a speed bump during the next few months.
The ETF popped up on our ‘hot by options volume’ market scanner this morning after a sizable block of out of the money put options changed hands. It looks like one strategist purchased 2,000 of the Jun $20 strike put options for a premium of $0.40 each, and suggests the trader is bracing for shares in the SOCL to potentially tumble roughly 13% during the next few months. The put buyer could be using these contracts as a relatively inexpensive way to hedge positions in the underlying holdings of the fund, or to protect a long position in the fund itself. For example, buying put options on Facebook that protect against a 13% dip in shares of that company would cost roughly $3.30 each (for the Jun $62.5 strike put options) while puts on LinkedIn looking for a 13% dip in those shares by May expiration (June series not currently available) tout an asking premium of $7.15 each as of 12:25 p.m. EST.
Of course, put options on these names offer tighter protection from adverse moves in the price of the shares, and it’s difficult to directly compare the purchase of contracts on the ETF versus the single stocks. Even so, the look to downside protection across a wide cross section of the social media space seems noteworthy as the ETF and U.S. stocks more generally reach new heights.
Chart – Social Media ETF and the relative performance of Tencent, Facebook and LinkedIn
