US options volumes flounder
27 February 2017 New York
Image: Shutterstock
The US options market is stagnating as a result of political and regulatory change in Washington DC, according to a TABB Group report.
The sharp U-turn in US government policy towards Wall Street reform following the inauguration of regulatory-sceptic President Donald Trump, “has caused a decline in market correlation and created an environment in which fundamental analysis will both drive strategy and support an ideal world for stock-pickers”.
“At the same time, demand from both retail and institutional options customers remains strong and is expected to rise alongside necessary repositioning in this evolving regulatory environment.”
The total volume in the US options market was 1.9 percent lower in 2016 than 2015, due to a lack of sustained volatility, according to TABB.
The report also predicted that 2017 volume would remain “stagnant”.
Andy Nybo, managing director at TABB Group and the report’s author, said: “Our data shows that US options markets are in a state of flux, which has been especially hard on strategies that specialise in trading volatility.”
“Although periodic volatility spikes have become common, such as with the noted increase we saw in June with Brexit and again with the US presidential election in November, most strategies that leverage volatility have found little reason to trade.”
“The events of 2016 have shown that the US financial markets have entered a new cycle, with a strong break down in market correlations, that if provided with sustained volatility could see options volume return to a more robust growth profile.”
The sharp U-turn in US government policy towards Wall Street reform following the inauguration of regulatory-sceptic President Donald Trump, “has caused a decline in market correlation and created an environment in which fundamental analysis will both drive strategy and support an ideal world for stock-pickers”.
“At the same time, demand from both retail and institutional options customers remains strong and is expected to rise alongside necessary repositioning in this evolving regulatory environment.”
The total volume in the US options market was 1.9 percent lower in 2016 than 2015, due to a lack of sustained volatility, according to TABB.
The report also predicted that 2017 volume would remain “stagnant”.
Andy Nybo, managing director at TABB Group and the report’s author, said: “Our data shows that US options markets are in a state of flux, which has been especially hard on strategies that specialise in trading volatility.”
“Although periodic volatility spikes have become common, such as with the noted increase we saw in June with Brexit and again with the US presidential election in November, most strategies that leverage volatility have found little reason to trade.”
“The events of 2016 have shown that the US financial markets have entered a new cycle, with a strong break down in market correlations, that if provided with sustained volatility could see options volume return to a more robust growth profile.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
