Hi all,
I primarily trade options on individual securities, but obviously I have to keep an eye on overall market conditions. A lot of my options trading is on biotech stocks and over the last year the entire biotech area has been marching downwards. Yesterday I was looking at the chart for XBI, an S&P Biotech ETF. Yesterday it closed at $79.84. For context, XBI was above $79.84 for almost all of 2019–before the fed's quantitative easing program intensified after COVID.
This would appear to suggest that the market is pricing in that that the expected fed tightening and the reversal of the fed's balance sheet purchases will cause destruction to pre quantitative easing levels. That seems extreme and has me thinking XBI is oversold. But I'd like to be able to assess with more accuracy than a hunch. Perhaps XBI going so low makes sense if it was overvalued in 2019 (past price does not mean said price was correct). Also the FDA has become stingy about approvals for new drugs after the Biogen fiasco, so that could also explain some of the price action.
So my question is this: Does anyone have recommended resources, models, articles, books, etc. that would aid in evaluating the value of an ETF or index? I understand it is something of a weird question because an ETF just tracks a basket of stocks. So one could respond that the ETF doesn't have any value–its just an assemblage of the value of the underlying securities. And that wouldn't be wrong, per se, but obviously the whole reason there are ETFs in the first place is the thought that some sectors might move differently than each other or from the entire market. XBI is actually a great exemplification of this in action–it is below most of where it was in 2019 but SPY is still well above all of its 2019 levels.
I want to dive into this and research all I can as to whether there's more room to fall, whether XBI is oversold, etc. Any suggested reading, or any feedback, would be great!
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