Renewed volatility in US listed options fed by fears of a global Ebola pandemic, collapsing oil prices and European economic weakness took trading volumes to their second highest level ever, reaching 4.3 billion contracts in 2014, 3.7% higher than 2013, according to a new quarterly research report from TABB Group.
During the fourth quarter, says TABB principal Andy Nybo, head of derivatives research, who wrote “US Options Market Review: Fourth Quarter 2014,” volume totaled 1.14 billion contracts, a 10% increase from the third quarter 2014 and a 10.1% increase over the same period in 2013. The role of short term options (STOs) with weekly expirations continues to grow in importance, with volume rising to a record 1.1 billion contracts in 2014, accounting for 27.6% of total volume.
Nybo also says spreads continued to widen, reinforcing research findings pinpointed in TABB’s 2014 buy-side study, “US Options Trading 2014/2015: The Buy-side’s Insatiable Thirst for Liquidity.“ He further explains that “average bid/ask spreads rose to 42 cents in October when the market encountered significant volatility, and even though November and December had lower spreads than October, the fourth quarter still recorded a 16% increase in spreads over 2013.”
The five-page, 22-exhibit report, which examines market trends in US listed options markets, providing detailed analysis and insight into volume trends across the index, ETF and single-stock sectors, covering trading in the most active symbols, by concentration and by type of account as well as trading in weekly options, supported by market-quality metrics and an examination of trends in volatility, is available for download by TABB Group Research Alliance Derivatives clients and pre-qualified media at http://www.tabbgroup.com/Login.aspx.
For a copy of the Executive Summary, more information or to purchase the report, write to info@tabbgroup.com.
