How Can Options Volume Climb Out of the Doldrums After Mediocre 2015?

Is more volatility good for the options market and juicing volumes?

Nope, it isnt. Thats what market consultancy Tabb Group said in its latest Liquidity Matrix report and 2015 review.

After reviewing the 2015 U.S. Listed Options market data, Tabb said that market turbulence is no simple fix the trading slump and overall volume drop evidenced in 2015. The consultancy reported that 2015 trading volume was down 2.9% from 2014.

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Furthermore, in looking at previous years data from 2012 to 2014, the industry may have inaccurately pinned slowing volume growth on the lack of volatility with claims that the calm environment eliminated trading opportunities.

In 2015, traders were dealt the most volatility since the European debt crisis and the CBOE VIX Index climbed to its highest levels since 2011. This turbulence didnt jump-start trading as expected and the sustained volatility couldnt bring traders back to the market either, explains TABB analyst and report author Callie Bost. Volume dropped off even more as additional options series were introduced, suggesting more choices for investors is not the cure to re-ignite trading.

The December 2015 TABB Options LiquidityMatrix finds that only 4.14 billion contracts were exchanged in 2015, a 2.9% drop from 2014 totals, while the options market posted lower year-over-year volumes in eight of 12 months last year. A prime example, Decembers U.S. listed options volumes totaled 338.8 million contracts, 4.8% higher than Novembers total, but 4.5% lower than December 2014.

The upside in volume data for 2015 comes from the encouraging growth in broad-market ETF and index products, continues Bost. Volume in ETF options increased to 37.4% of total volume from 35.2% in 2014, while volume traded in index options climbed to 10%. Still, investors use of single-stock options declined to 52.6% of total volume from 54.9% in 2014.