The Chicago-based exchange operator CBOE Holdings Inc, which is listed on the NASDAQ under ticker CBOE, has just released trading metrics for February that showed a broad decline for its options and futures trading contract totals when compared to the first month of 2016.
Total volume was lower by 10% to 92.9 million contracts traded in February when compared to the previous month, from across the CBOE Futures Exchange (CFE) and the Chicago Board of Options (CBOE) and C2 Options Exchange (C2) business segments operated by the group. On a year-over-year basis these totals were up 5% comparatively.
Despite the extra trading day in February, Average Daily Volume (ADV) was down sharply by 14% to 4.6 million contracts from January 2016 or month-over-month (MoM) yet unchanged when compared to the same month last year (YoY).
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The exchange group said that its ADV in February from index options was also down 13% MoM, yet higher by 26% YoY, which could reflect that traders in January were initiating options positions in anticipation of continued market volatility, whereas in February the ongoing heightened volatility made options premiums already more expensive.
This can occur when implied volatility – which had surged – is used to calculate the value of options premiums based on what the market is expecting when measured against the historical volatility of the underlying. The volatility inflated premiums could have caused those same investors to look elsewhere for hedges or to speculate with an inverted ETF for example, as many traders sat on the sidelines awaiting a clearer market direction.
ADV was 13% lower in equity options and down 26% YoY, and options on exchange traded products (ETP) saw ADV down 17% over January’s totals, yet unchanged YoY. The changes year over year also include the offset of one extra trading day that February 2016 had due to the leap year, when compared to February 2015 as seen in the excerpt below from the CBOE statement:
The news follows just hours after the company announced two new exotic options products set to launch later this month.