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Growth in SPY options volume has outpaced the growth of the total volume traded in listed S&P 500 index options, in part because ETF options allow for more accessibility than index options, as they are denominated on a smaller notional.
SPY, IWM and QQQ the most liquid ETF options within equities: Options on equity-based ETFs have approximately $36 billion notional traded per day with the SPY (S&P 500), IWM (Russell 2000) and QQQ (Nasdaq 100) making up $32 billion per day (Figure 4). Since its inception in 2005, options on SPY have grown tremendously and are now trading at approximately $26 billion notional per day. This growth can be attributed to the popularity of S&P 500 optionality (a global benchmark for equities), combined with SPY’s minimal tracking error (as its underlying stocks are the largest U.S. companies) to the S&P 500. Within the equity-asset class, the top three volume leaders represent a diverse selection of equities with access to U.S. large- and small-cap stocks (NYSE Arca: SPY and NYSE Arca: IWM) and technology stocks (Nasdaq GM: QQQ).