In a market where stock volume is evaporating, volume in short-term options is surging.
A daily average of 309,000 contracts on the Standard & Poor?s 500 Index (SPX) that expire weekly have changed hands in the first four days of September, about 72 percent more than a year ago, according to data from CBOE Holdings Inc. The contracts made up 53 percent of all those traded on the index on Sept. 5, when the last U.S. jobs report was released.
The growing market for S&P 500 weekly contracts comes at a time when investors are seeing little volatility in the broader equity market and share trading is languishing at the lowest on record. The options are used as a tool to protect stock holdings from brief losses or price swings after economic reports or Federal Reserve meetings, according to Salil Aggarwal of Deutsche Bank Securities Inc.
?We?ve been having a lot of macro-driven and Fed-driven events where people can get ahead of them in more targeted ways,? Aggarwal, a New York-based equity derivatives strategist, said by phone.
The options, which started in October 2005, are usually listed on Thursdays and expire the following Friday.
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