Will 2014 be a Good Year for Options Traders?
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2013 certainly closed on a high note for equity investors -- with near 30% gains for the SP500 and Nasdaq indexes, and hundreds of stocks finishing the year with all-time record highs. Many buy-and-hold investors are seeing account values well above the dot.com bubble level, and mainstream media is busy debating the validity of the bull-market versus the risk of a pullback.
While official data from the Options Clearing Corporation is not yet finalized, preliminary data shows that total option volume in 2013 ticked higher as well- with more than 4.1 billion contracts changing hands last year- about a 3% increase from 2012, but still well below 2011 volumes when volatility was much higher and nearly 4.6 billion traded. A decline in dividend-related trading hit the numbers a bit this year as rule and policy changes were implemented to minimize that activity, but overall this is a very solid record for the industry.
Our data shows that 2013 trading volume broke out as 54% single-stock, 35% ETF, and 11% index products, while the most active products for the year were (unsurprisingly):
Total listed option open interest finished the year near 284million contracts- more than 30million contracts ahead of last-year and a very good indicator of the health of the market. Weekly's have become a major part of the market-- last year nearly 500 million weekly contracts traded- making up nearly half the volume in Apple (AAPL) on many days.
We expect 2014 to be another good one for options traders, as the basic motivating factors (hedging and leverage) are persisting and continued macroeconomic issues driving steady volume.
Complex order volume and algorithmic options trading is likely to increase this year (as it has every year) and we will continue to focus on identification of the most informed and aggressive flow as a key to forming and managing our trades.
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