Is the worst ETF of 2016 about to get even worse?

Is the worst still to come for this year's most beaten down ETF?

Biotech stocks have suffered extreme losses recently amid the broader market sell-off. The SPDR S&P biotech ETF — XBI — has plunged more than 30 percent year to date. Excluding leveraged ETFs, XBI has fallen more than any other exchange-traded fund in 2016, as of Friday's close.

Most investors are more familiar with the larger iShares Nasdaq Biotech ETF (IBB), which is down a somewhat milder 24 percent this year. While both ETFs contain many of the same components, IBB is most heavily weighted toward the bigger biotech names; 38 percent of the IBB is composed of just four stocks, Celgene, Amgen, Biogen and Gilead. These stocks have held up better than many of the smaller companies contained within the (XBI), which are generally seen as riskier.

According to Susquehanna head of derivatives strategy Stacey Gilbert, options traders are expecting more big swings ahead for XBI.

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"I don't think we're out of the woods in terms of this sector becoming less volatile," Gilbert said Friday on CNBC's "Trading Nation."

However, the volatility cuts both ways. As stocks on the whole rise Tuesday, the XBI is up as much as 4 percent, while the IBB is up just 2 percent.

Looking at the chart of XBI, Todd Gordon of said the ETF has held above an important support level at $45, which should set it up for more short-term gains.

"[XBI] might have a shot to regain its footing," Gordon said Friday on "Trading Nation." "I don't think it's going to lead us up in 2016, but I think some of the selling will abate."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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