Growth vs Defensive vs Cyclicals

[KohPhiPhi]

Hello investors!

I am looking to split my SPY allocation into 3 separate ETFs: one for Growth sectors (consumer discretionary, tech, communication), another one for Defensive sectors (staples, healthcare, utilities) and another one for Cyclical sectors (energy, materials, financials, industrials, real estate). The main requirement is that they are liquid in the options market as I usually prefer to gain exposure via options rather than buying the underlying outright.

Any suggestions for those 3 ETFs?

Thanks!

 

[M.W.]

Why options? You are paying away expensive theta for no perceivable benefit. If those position make up a large chunk of your portfolio anyway then you must risk manage those positions and set stops. If you chose options because of leverage and can't otherwise gain the same exposure through cash instruments then that means you are overleveraged as investor. So, why options?

Hello investors!

I am looking to split my SPY allocation into 3 separate ETFs: one for Growth sectors (consumer discretionary, tech, communication), another one for Defensive sectors (staples, healthcare, utilities) and another one for Cyclical sectors (energy, materials, financials, industrials, real estate). The main requirement is that they are liquid in the options market as I usually prefer to gain exposure via options rather than buying the underlying outright.

Any suggestions for those 3 ETFs?

Thanks!

 

[KohPhiPhi]

Why options?

I prefer to manage my risk via options than via stop losses, I just find them more flexible and they protect me better in case of price gaps or liquidity dry outs. Also, I like to gain exposure on my long term positions through deep ITM LEAPs (80+ delta) which carry very small extrinsic value, so theta bleed is minimum. And of course, they're far more capital efficient. So yeah, I find deep ITM LEAPs superior to stock + stoploss.

Anyway, back to the original question: Any suggestions for those 3 ETFs? Thank you!

 

[nitrene]

There are ETFs that cover these areas but they extremely illiquid. I believe Invesco covers these their DWA series of ETFs.

Your best bet is to stick with the 11 sectors you mentioned and weight them yourself. SSGA makes the SPDR ETFs. They are fairly liquid especially XLF, XLU, XLK & XLE. Currenty the XLF goes all the way up to Jan 2024 LEAPs.