Question on XLF vs KBE options

[TulsaTrader]

Looking at the 3/19 put options on XLF and KBE and it looks like most of the options for KBE have a higher IV. I'm kind of surprised by that because KBE is an equal weight ETF.

I would have expected it to be lower volatility since there's equal exposure to each component.

Are equal weight ETFs actually more volatile?

 

[Dame de Hasard]

Looking at the 3/19 put options on XLF and KBE and it looks like most of the options for KBE have a higher IV. I'm kind of surprised by that because KBE is an equal weight ETF.

I would have expected it to be lower volatility since there's equal exposure to each component.

Are equal weight ETFs actually more volatile?

I can't recall what are the actual components for either ETF, are they the same? If an equal weight ETF has more exposure to lower cap stocks, it makes sense that it would have higher implied volatility assuming the same correlation.

 

[stepandfetchit]

The lack of liquidity on KBE options make drawing conclusions from the IIV problematic.
Friday, about 800 options total across all expirations and strikes traded on KBE, where there were 126K for XLF.

 

[drm7]

Equal weight = higher exposure to smaller and less liquid/more volatile companies. 25% of XLF is big boring Berkshire Hathaway and big boring JP Morgan.
Also, KBE is not as diversified as XLF (banks vs. all financials).