Following a bullish start to 2010, a quick three-day plunge shows investors are still playing defensively. Investors placed bearish put option bets worth more than $1.2 billion in stock on several top exchange-traded funds.

A total of 400,000 contracts were traded in the Materials Select Sector SPDR fund (XLB: Quote, Profile, Advanced Chart, News), the SPDR S&P Retail fund (XRT: Quote, Profile, Advanced Chart, News), the SPDR KBW Regional Bank Index (KRE: Quote, Profile, Advanced Chart, News) and the Consumer Discretionary Select Sector SPDR fund (XLY: Quote, Profile, Advanced Chart, News) last Friday morning. The volume was so great that analysts suspect it was part of a large institutional hedging operation, with each put priced 20% out of the money, Reuters reports.

The trades, which cost just $6.2 million in premiums, suggest that at least one institution is protecting itself from a potential drop of 20% by March expiration.

PowerShares has filed to create 10 new small cap ETFs to take advantage of extreme investor demand for niche industry ETFs. Small cap stock funds have been in heavy demand, with investors betting small names will outperform larger companies in a year of recovery.

The ten new proposed funds are as follows:

1. PowerShares S&P SmallCap Consumer Discretionary Portfolio

2. PowerShares S&P SmallCap Consumer Staples Portfolio

3. PowerShares S&P SmallCap Energy Portfolio

4. PowerShares S&P SmallCap Financials Portfolio

5. PowerShares S&P SmallCap Health Care Portfolio

6. PowerShares S&P SmallCap Industrials Portfolio

7. PowerShares S&P SmallCap Information Technology Portfolio

8. PowerShares S&P SmallCap Materials Portfolio

9. PowerShares S&P SmallCap Telecommunication Services Portfolio

10. PowerShares S&P SmallCap Utilities Portfolio

Each fund is comprised of a smaller composite of stocks generated from the S&P SmallCap 600 Index, and each stock will have a market cap of $250 million to $1.2 billion, according to the SEC filing. Included companies must also have at least 50% ownership divested in the general public.

Geo-specific small-cap funds have found incredible success with investors; however, few issuers have targeted specific industries. No annual fees or ticker symbols were disclosed in the prospectus.

FaithShares will be releasing five new ETFs to capitalize upon today’s socially responsible investing trend. The new funds are designed around investments that are aligned with five prominent religions in the United States.

According to the SEC Filing, FaithShares announced the names for its five new exchange traded funds:

-FaithShares Catholic Values Fund
-FaithShares Methodist Values Fund
-FaithShares Baptist Values Fund
-FaithShares Lutheran Values Fund
-FaithShares Christian Values Fund

A popular trend among mutual funds, socially responsible investment options in ETFs have been limited, with one company, iShares, controlling the only two SRI ETFs. FaithShares is hoping to take a share of the market, and each fund is set to offer portfolios encompassing 100 US stocks, with all positions being equally weighted to 1% of the fund.

The funds will select companies from a broad selection of industries, including oil and gas, telecommunications, technology, basic materials, health care, utilities, industrials, consumer services, and financials.

President-elect Barack Obama will take over the economic controls in a short two weeks. With a promise to inject the infrastructure industry with the largest investment in nearly 60 years, it is time to review how a few of the industry-tracking ETFs are constructed. Matt McCall, president of investment adviser Penn Financial Group LLC in Ridgewood, N.J., is quoted in MarketWatch, confirming, “There are buying opportunities in many infrastructure ETFs.”

Infrastructure encompasses many industries. John Spence of MarketWatch identifies associated market segments such as construction, engineering, utilities, building materials, industrial equipment and metals. In review of two infrastructure ETFs, known as SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII: Quote, Profile, Advanced Chart, News) and iShares S&P Global Infrastructure Index Fund (IGF: Quote, Profile, Advanced Chart, News), both broadly track the concept of infrastructure, yet GII is comprised of 90% utilities while IGF has much less of a share at approximately 40%.

MarketWatch points out examples of infrastructure-related ETFs in other areas, to include First Trust ISE Global Engineering & Construction Index Fund (FLM: Quote, Profile, Advanced Chart, News), PowerShares Dynamic Building & Construction Portfolio (PKB: Quote, Profile, Advanced Chart, News), and Materials Select Sector SPDR Fund (XLB: Quote, Profile, Advanced Chart, News).

Investors looking for where to allocate their funds as the new President takes over the helm may have gotten some answers today. In what is considered the biggest investment in over 50 years, President-elect Barack Obama is reported to be directing approximately $500 billion into the infrastructure industry with hopes of stimulating the American economy, according to Carl Gutierrez of Forbes. With a boost to infrastructure, the materials ETF naturally grew as demand and confidence spiked. Materials SPDR ETF (XLB: Quote, Profile, Advanced Chart, News), which is comprised of companies such as Caterpillar and Deere, jumped nearly 7% in one day after the economic plan was made public.

The energy industry also reacted positively to the Obama plan. The Forbes article discusses the direct relationship between development and the increased demand for energy. The Energy Select Sector SPDR ETF (XLE: Quote, Profile, Advanced Chart, News) also gained value today as many investors look to keep a close eye on this industry and the alternative energy solutions that are a hot topic with the next President. Below is a one-week chart of XLB, illustrating the positive reaction in the material industry after the news.