Q3 Options Volume Dips


Options volume took a dip in the third quarter but still maintains healthy year-over-year gains.

Listed options volume dipped in third quarter of this year, according to the latest Tabb Group research,  reversing the modest increase seen in the second quarter. Trading in the period totaled 1.02 billion contracts, a 3.0% quarter-over-quarter decrease and a 3.1% increase from the same period a year ago.

After 9 months, 2017 listed volume is up 1.8% compared to the same period in 2016. Tabb Group still projects that 2017 full-year volume will surpass, though very slightly, 2016’s total volume.

Also in the report, Cboe was reported as the market share leader for trading. The Cboe family of exchanges snagged 41.8% of listed US equity options market share year-to-date as of September. Nasdaq followed in second place with 36.8%. ICE/NYSE year-to-date market share was 13.8%, followed by MIAX with 5.5% and BOX at 2.1%.

When it came to options maturity, short-term Expirations slipped from record levels, Tabb noted. Trading in options with short-term expirations (5 weeks or less) totaled 318 million contracts in the third quarter, a 4.1% quarter-over-quarter decrease and a 3.8% increase compared to the same period last year.

Volume for August represented the third highest monthly volume in 2017.

The 318 million contracts traded in the third quarter represents the third most of any quarter on record.

All this activity continued amid low volaitility levels as measured by the Cboe VIX index. During the third quarter, averaged 11.35, with 23 trading days settling below the 10 level. The VIX hit a high of 16.04 on Aug. 10, 2017, and a low of 9.36 on July 21, 2017. The CBOE VVIX index spent most of Q32017 above the YTD 2017 average of 87.5, with 7 days settling above the 100 level.

Tabb analysts also reported that spreads have tightened as trade size shrinks: The average bid/ask spread tightened by 3 cents in the third quarter compared to the same period one year earlier, with the average at 27 cents in the period, down from the 30-cent average a year ago. The tighter spreads were accompanied by yet another quarterly drop in average bid/ask size in Q3, to 104 contracts, compared to 127 in the second quarter and 151 contracts during the same period in 2016.

The third quarter also saw some developments across the industry that were worth noting. First, BOX Options Exchange opened its new trading floor. What makes this relevant is that it will be a voice broking pit configuration as opposed to the current trend towards electronification. Also, BOX’s opening comes amid staunch opposition from several exchanges and venues who argued one more exchange would further fragment the marketplace.

“Time will tell if there is a niche for another floor operation, which is mostly designed to handle complex orders,” wrote Tabb analysts. The consultancy added that BOX should be a positive developeemnt for the marketplace.

Crypto, crypto, crypto. The latest buzz in the market can also be found on Cboe as it announced it was collaborating with crypto exchange Gemini to develop a bitcoin derivative. Tabb said that given this new development, it expected Cboe to take the lead in this new asset class and trading within it.

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