Derivative Trading Just Keeps Getting Bigger

Chicago Board Option Exchange (CBOE) reports an increase in derivative trading of 33% in September, compared with the month before. It’s the twelfth month in a row with rising volume at CBOE. Over the last year the trading has grown by over 300%. On September 28th weekly options on VIX Futures was launched.

“With this launch, all key pieces of the VIX product suite are available on CBOE’s electronic technology platform.”

Chicago Board Option Exchange

Engraved specimen Heating Oil Demand Certificate from the Board of Trade of the City of Chicago dated in 1982.

The rare specimen of a future contract oil is only 28 years old, but already antique. It’s a perfect illustration of how fast the financial industry is developing. Only the last twelve months. the trading volume have increased by 307%.

According to a press release from the CBOE Futures Exchange, LLC (CFE),  September 2010 trading volume totaled 387,464 contracts, compared to 144,016 contracts during September 2009.  September was also the second most active trading month on record at CFE.  Only bypassed by the 481,650 contracts traded in May 2010.

September was the twelfth consecutive month in which total volume registered an increase when comparing year-over-year trading activity.

“September volume increased 33 percent from the 291,533 contracts that traded during August 2010.”

Average daily volume (ADV) of 18,450 contracts during September was the second highest monthly ADV, ever at CFE exceeded the year-ago ADV of 6,858 contracts.

“When compared to 13,250 contracts per day during August 2010, ADV in September rose 39 percent,” CBOE reports.

Volume for the third quarter of 2010 totaled 949,011 contracts, an increase when compared to the 124,628 contracts from the third quarter of 2009, but down slightly from the 1,039,632 contracts traded during the second quarter of 2010.

CFE’s year-to-date trading volume of 2,615,343 contracts is ahead of the 641,874 contracts for the same period in 2009.  Year-to-date ADV is 13,911 contracts, versus the 3,414 contracts per day in 2009.

Trading Options On Future Fear

September volume in VIX futures, based on the CBOE Volatility Index (ticker VX), totaled 386,969 contracts traded, exceeding the 143,585 contracts in September 2009, and was 33 percent above the 290,995 contracts in August.

ADV in VIX futures during September was 18,427 contracts, compared to the 6,837 contracts per day a year ago and the 13,227 contracts per day from the previous month.

On Tuesday, September 28, Weekly options on VIX futures began trading at CFE.

The VIX Index is commonly known as the “fear gauge” of the stock market.

Weekly options on VIX futures – with American style expiration and physical settlement – are initially featuring four consecutive contracts with weekly expiration on Fridays, allowing investors to select a contract with either one, two, three or four weeks to expiration.

CFE adds a new contract when the near-term contract expires.

“With this launch, all key pieces of the VIX product suite are available on CBOE’s electronic technology platform, CBOEdirect – cash-settled CBOE Volatility Index (VIX) options, VIX futures, options on volatility-related exchange traded notes (ETNs), and now, weekly options on VIX futures,” the world leading option and future exchange writes.

(For an overview and complete product specifications on weekly options on VIX futures; http://cfe.cboe.com/Products/Spec_VIXWeeklys.aspx.)

Volume in CBOE mini-VIX futures (ticker VM) totaled 472 contracts for the month, an increase of 11 percent from the 427 contracts traded in September 2009, but a decrease of 12 percent from the 536 contracts traded the previous month.

CBOE mini-VIX futures contracts are one-tenth the size of CFE’s standard CBOE VIX futures contract.

(Additional details on VIX futures: http://cfe.cboe.com/Products/Products_VM.aspx.)

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  1. Pingback: Derivative Trading Just Keeps Getting Bigger « Econotwist's Blog