Falling volatility in the fourth quarter led to a drop in U.S. listed options trading volume, according to one market consultancy.
In its latest report, US Options Market Review: Fourth Quarter 2015, Tabb Group reported that U.S. options volume slipped in Q4 2015 as volatility calmed after a turbulent summer. Trading in the period totaled 1.02 billion contracts, a 12% decrease from Q3 2015 and a 10% drop from Q4 2014.
In examining the latest trends in the US-listed options markets, report author Callie Bost said that the chief reason behnd the drop in trading was that volatility levels were generally lower in Q4 2015 versus Q3 2015 as the S&P 500 Index recovered from a correction in August and September.
Investors nervousness around the Federal Reserves plans were alleviated when the central bank announced its first interest-rate hike in nearly a decade, Bost wrote.
Also, Bost reported that there was a rise in trading of contracts with weekly expirations totaled 1.15 billion contracts in 2015, 9% higher than the 1.06 billion 2014 total. Weekly volume accounted for 22% of total volume in December, representing the lowest monthly reading of 2015. The most active weekly options among indices/ETFs were S&P 500-based names (SPX, SPY).
Average bid/ask spreads in Q4 2015 remained unchanged from the prior quarter. The average bid/ask size at the top of the book shrunk to the smallest size since November 2013 as market makers reduced risk exposures in the more volatile options trading environment.
The full report, US Options Market Review, examines market trends in US-listed options markets including index, ETF and single-stock sectors, examining trading in the most active symbols, by concentration and by type of account.
