US options on track for record year

Options volumes in the US could see record year according to research from TABB Group.

Options trading in the US could see a new record year of activity despite a drop in volumes in the second quarter, according to statistics from TABB Group.

TABB Group’s US Options Market Review report found that total options volume in the second quarter were down 15% from the first three months in 2018, after volatility spiked at the beginning of the year.

Although average daily volume in the second quarter was up almost 10% compared to the same period in 2017, with June’s average daily volume up 23% on a year-on-year basis.

TABB Group has predicted that options trading will see a new record and industry volume is on track to top 5 billion contracts for the first time this year, which would represent a 20% increase on last year.

The options report suggests that the record pace  in options has been driven by first quarter volumes, which profited from a volatility spike, but also a rise in exchange-traded fund (ETF) options which were up slightly in the second quarter.

“Options on ETFs continue to grow in popularity in sync with the growing use of exchange traded funds,” said Russell Rhoads, head of derivatives research at TABB Group, and author of the report.

“Year to date ETF option market share is 39.1% which compares favourably to 38.3% at this time last year. ETF option market share gains from 2017 to 2018 have come from both equity and index options.”

Amid a surge of activity, the two largest exchange groups, Cboe Global Markets and Nasdaq, have seen a drop in options market share.

Cboe’s market share decreased from 41.8% in the first six months of 2017, to 38.4% in the same period this year, while Nasdaq’s market share fell from 37.2% to 35.3%. At the same time the New York Stock Exchange gained market share from 13.4% at this point in 2017 to 16.3% this year.