Investors Bet Against Cathie Wood’s ARK Innovation ETF. It May Be a Buy Signal.

Text size

Option investors are betting against investor
Cathie Wood.
It could be a bullish development.

 The volume of put options traded on the

ARK Innovation ETF

(ticker: ARKK), Wood’s flagship exchange-traded fund, surged Thursday to 179,000 contracts, according to a research note from Chris Murphy, co-head of derivatives strategy at Susquehanna Financial Group. The 20-day average is 66,000.

 “Bears are circling, but I would note the last time put volume spiked (around May 13), ARKK was up around 30% 6 weeks later,” Murphy wrote. Wood is CEO and chief investment officer of ARK Investment Management, which runs the ETF.

 The

ARK Innovation ETF

was up 76 cents at $117.16 late Friday afternoon, but down from a February high of around $160.

The fund, whose top holdings are

Tesla

(TSLA),

Roku (ROKU)

and

Teladoc Health

(TDOC), soared more than 100% last year on the strength of those and other growth-stock holdings, becoming one of the hottest plays in the stock market. The ETF has pulled back about 8% in 2021. It has about $25 billion in assets.

Murphy noted that all of the five days with the highest put volumes involving the ETF have come this year. He wrote that the ETF was higher after each of those days, with an average gain of 5.8% two weeks later.

Rising put volume can be a bad sign for a stock or fund, but it could be a contraindicator for the ARK Innovation ETF, he says.

Write to Andrew Bary at [email protected]