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Options Top Index Options At CBOE Since early last year, options trading using ETFs has been soaring. In fact, at least in the opening months of 2008, ETF options have surpassed those of more established index options in certain markets. According to CBOE data, January and February trading of the 25-year-old options on indexes averaged about 992,000 in daily volume. At the same time, ETF options averaged 1.3 million a day. That represented a 124% jump from the same two months of 2007. “We’ve seen big growth every year in ETF options,” said Matt Moran, vice president of business development at the CBOE. “But all options have been growing. So it’s part of a larger pattern we’re seeing.” He says growth in ETF options is tied into a few different factors. For one, more education about how to use options as insurance and a means to mitigate risks coincides with retail investors discovering ETFs as diversification tools. “As ETF assets have grown, a lot of the ETF providers are becoming big believers in options,” Moran said. “They’ve come to us and asked for options to be listed on their new ETFs.” But the recent surge in ETF options trading is still somewhat confined. Three ETFs have dominated that activity. The latest CBOE figures show that in January and February: • The iShares Russell 2000 Index Fund (NYSE: IWM) has averaged 395,383 daily options volume, a 97% increase from the same period a year ago. • PowerShares QQQ (NASDAQ: QQQQ) averaged 268,000 in options trading per day, up 61% compared with the same time last year. • The SPDRs (AMEX: SPY) averaged 337,000 daily options trades, up 242%. The next biggest was Financial Select Sector SPDR (AMEX: XLF), which saw a 1,200% leap compared with a year earlier. But it represented a much lower level, about 71,000 trades per day. Perhaps just as interesting, some of the more popular names aren’t always the biggest draws in terms of options trading. “More diversified ETFs that lend themselves to being more of buy-and-hold vehicles may have huge asset size, but aren’t usually going to be found at the top,” noted Moran. An example he gives is iShares MSCI EAFE Index fund (NYSE: EFA). |
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