Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

21546

Listed options get a Brexit boost in Q2

RELATED TOPICS​

Listed options volume climbed in June to its highest level in 10 months after a stock market swoon on the heels of the United Kingdom’s decision to leave the European Union, accordoing to data released by TABB Group.

Volume in Q2 hit 1.01 billion contracts, a 3.2 per cent drop from Q1 2016’s volume, but a 4.6 per cent increase over Q2 2015’s totals.

In June, listed options volume climbed to its highest levels in 10 months after a stock market swoon that erased more than 5 per cent from the S&P 500 Index (S&P 500) on the heels of the United Kingdom’s decision to leave the European Union. The June activity boosted volume in the quarter to 1.01 billion contracts, a 3.2 per cent drop from Q1 2016’s volume, but a 4.6 per cent increase over Q2 2015’s totals.
 
US stocks had a relatively calm quarter until June 24, the day after the Brexit vote when results were released. The S&P 500 dropped 5.3 per cent in two days, while the CBOE VIX Index (VIX) climbed to a four-month high. While stocks’ Brexit selloff was quick, the subsequent recovery was even quicker. The VIX dropped 39 per cent (or 10.1 points) in five days, as the S&P 500 regained all of its losses and ended up closing higher for the month of June, albeit less than 0.1 per cent higher.
 
The surge in June’s option volume was propped up by a rush into broad-market index products. Index and exchange-traded fund (ETF) options comprised 57 per cent of total volume in June, the highest concentration for the two groups since 2012. As geopolitical events and monetary policy developments continue to rattle markets, traders are increasingly gravitating toward options on indices and ETFs for portfolio protection.
 
Volatility-based options were especially popular during the first half of the year amid elevated volatility in January and February and the VIX’s Brexit-induced spike and retraction. VIX options volume grew the most out of the top-traded symbols, posting 35 per cent more volume in H1 2016 than in the same period last year. Volume in VIX options totalled 15.9 million contracts in June, 21 per cent higher than volume in the year-ago June.
 
Volume in volatility-linked weekly options has also flourished this year as traders try to capture quick moves in the VIX, similar to what happened during the Brexit market event. Short-term options on the ProShares Ultra VIX Short-Term Futures ETF (UVXY), which holds front-month VIX futures, soared 196 per cent in H1 2016 compared to the same period last year. Weekly options volume on the iPath S&P 500 VIX Short-Term Futures exchange-traded note (VXX), which is also tied to the performance of short-term VIX futures, surged 34 per cent in H1 2016 over the first half of last year.
 
The volatility in June prompted market makers to pull back their risk exposure, with the average bid/ask spread widening to 38 cents, the widest since June 2015. Despite the surge in June, average bid/ask spreads in Q2 2016 were generally unchanged from the prior quarter, averaging 35 cents in Q2.

Latest News

Global index revenues increased 9.3 per cent in 2023, totalling a record USD5.8 billion, according..
Octopus Investments (Octopus) has announced it has launched a Natural Capital Strategy...
Research firm focused on Alternative UCITS funds, Kepler Absolute Hedge, has published its Market Intelligence..

Related Articles

Trends
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100 million deals announced this month alone...
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100..
Different flavours
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led, multi-boutique global asset manager with over USD20 billion under management, recently undertook a survey with 204 UK investment professionals, seeking insights into their perceptions and attitudes towards boutique asset managers...
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led,..
UK map
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be worth billions of pounds in the coming years...
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be..
The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a possible buyout of EY’s Italian consulting branch...
The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by