U.S. Options Trading Grows to 1.16bn Contracts in Q3

Options trading regained some of its lost momentum as the Fall approached.

A bout of stock-market turbulence in August and September ignited U.S. listed options trading in the third quarter, according to market consultancy Tabb Group.

Callie Bost, who wrote US Options Market Review: Third Quarter 2015, which examines market trends in US-listed options markets and provides detailed insight into volume trends across the index, ETF and single-stock sectors, examining trading in the most active symbols, by concentration and by type of account. It also examines trading in weekly options, provides market quality metrics and examines trends in volatility.

According to Bost, total volume in the third quarter reached 1.16 billion contracts, a 20% increase from Q2 2015 total volume and an 11% increase from Q3 2014. Volume year-to- date is down 0.2% from the same period in 2014.

Weekly options trading experienced a similar surge in interest in the third quarter.

Short-term options (STOs) expirations volume totaled 327.7 million in Q3 2015, 18% higher than Q2 2015s 277 million contracts and 22% higher than Q3 2014s 269 million contracts.

Weekly options volume in S&P 500-based ETFs saw rapid growth in the period as investors favored the contracts as a hedge against sudden market swings.

Volatility in Q3 was the highest since Q2 2012 amid uncertainty resulting from Greeces debt negotiations in July and the correction in Chinas equity markets.

The CBOE VIX climbed above 40 in August, its highest closing level since 2011.

The VIXs average level in September jumped 85% from the year-ago September as it closed above 20 for 30 consecutive trading sessions.

The average level of CBOEs volatility of volatility index (VVIX) came in higher for every single month in 2015 when compared to 2014, suggesting that the volatility readings themselves were volatile as well and investors expect more VIX volatility going forward.