Lu Wang Writes:
U.S. options trading is settling back into a calmer pace after last month?s burst of market volatility sent volume toward one of its strongest years.
The number of option contracts changing hands jumped 22 percent jump in October amid the biggest retreat in two years for the Standard & Poor?s 500 Index. (SPX) That brought year-to-date volume to 3.62 billion, a 4 percent gain, according to data compiled by Chicago-based Options Clearing Corp. Should that pace continue, volume would reach 4.3 billion by December, exceeding all but one year since OCC data began in 1973.
Demand for options, often used by investors to protect against declines in equity holdings, surged on concerns the global economy was slowing down as the Federal Reserve prepared to end its stimulus plans. With the S&P 500 recovering all its losses during September and October amid improved economic data and corporate earnings, hedging interest will fall in coming months, according to Randy Frederick at Charles Schwab Corp.
?We?re likely to press to new territory for the remainder of this year? on the S&P 500, Frederick, managing director of trading and derivatives at Charles Schwab, said by phone from Austin, Texas. ?Economic data across the board are pretty solid. With the midterm elections and the end of the Fed tapering process now passed, there are few reasons for the market to be concerned. Options volume will probably continue to trickle off.?
He forecast an increase of between 1 to 2 percent in options trading for the whole year.
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