Thursday, September 1, 2011

US options trading volumes double

This article originally appeared here: US options trading volumes double -

Options trading volumes in the US nearly doubled in August from the same month last
year, surpassing half-a-billion contracts for the first time as extreme volatility sent traders
to the derivatives markets to hedge their positions.

More than 550m options contracts changed hands last month, a 94 per cent increase from
August 2010’s 283m contracts, according to the Options Clearing Corporation, which
clears for all nine US options exchanges. On average, 24m options were traded in the US
each day in August, up from less than 13m a day in August 2010.

The data underline how traders are making increasing use of options with money
managers and retail traders seeking to protect themselves from sudden market plunges as
uncertainty pervades the global economy following the gridlocked debate in Washington
over raising the US debt ceiling and Standard and Poor’s downgrade of the US’s debt

The previous monthly options trading volume record was achieved in March, when 417m
contracts changed hands. The industry has seen rapid growth this year, in spite of dips in
April and May. So far this year, more than 3.1bn options contracts have traded in the US,
up 22 per cent from last year.

The boom in volumes is good news for options exchanges, which compete fiercely in a
crowded market where every point of market share is energetically fought for. Exchanges
frequently change their pricing models to attract different kinds of traders.
Three operators dominate the market, each of them controlling two different optionstrading platforms.

The Chicago Board Options Exchange group, the oldest and traditionally the most powerful
in the industry, saw its share of the market rise to nearly 28 per cent in August, up slightly
from the 27 per cent it held in August 2010.

While volumes dipped slightly on CBOE’s traditional exchange in Chicago, its overall
market share was boosted thanks to C2, the all-electronic, New York-based platform it
launched last year, which is designed to appeal to high-frequency traders.

Amex and Arca, the two US options-trading platforms operated by NYSE Euronext,
secured almost one-quarter of the overall market in August, up from the 23 per cent of
trading volumes they garnered in the same month last year.

The Nasdaq Options Market and PHLX, Nasdaq OMX’s two options-trading venues, saw
collective market share dip to 23 per cent from 28 per cent a year ago.

The International Securities Exchange, owned by Eurex, the derivatives arm of Deutsche
Börse, saw a slight fall in its market share to about 17.5 per cent.

*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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