Options to Continue Growth
With options volume on pace for a ninth straight year of record volume, market participants believe there is still more room for growth.
Options trading looks to sustain record growth as volatility lingers in the marketplace.
“There was a lot of question of whether or not (options) growth was flattening,” said Edward Provost, executive vice president and head of business development at the Chicago Board Options Exchange, during the Sept. 14 FIA/OIC Equity Options Conference. “The last several months are showing that option products are versatile enough for any market condition.”
According to the OIC, August was the first time in history that there was more than a half billion options contracts traded during a single month, with over 550 million contracts. That represented a 94 percent increase year-over-year, from the 283 million contracts traded in August 2010. It also set a daily volume record on Aug. 8, when 41.5 million contracts changed hands, marking the first time that over 40 million contracts were traded on a single day.
But despite the record growth, participants believe there is more that can be done.
“Education is our best marketing tool,” said Provost. “An educated customer is one that will use your products and be there in the long run.”
“About 20 percent of options volume is from asset managers,” said Steven Crutchfield, chief executive officer of NYSE Amex Options. Like CBOE, he added that Amex is looking to increase that number through education to “help that client segment understand how to use these products to fit their portfolios and needs.”
“CNBC is like an all day advertisement on VIX,” said Provost. There are currently no less than 13 different volatility products offered by CBOE, and although Provost points out that not all of them are as successful as the main VIX index, the company is continuing to see substantial use of all its volatility products. “As customers understand how volatility plays in market, we will benefit from the byproduct of the trading,” Provost added.
Clients want short-dated options to hedge or trade with more flexibility around market-moving events.
CEDX opened on 6 September, offering contracts on Cboe Europe single country and pan-European indices.
Abu Dhabi Securities Exchange plans to launch single stock futures and index futures in Q4.
Retail participation across CME continued to grow during the first half of the year.
QB’s Algo Suite for futures market trade execution is also being co-located to HKEX.