The Very Merry Month of May, or Record Options Volume Posted

Posted June 7th, 2010 by The Options Insider in Industry

The Very Merry Month of May

Whileregulators are still scratching their heads over May's volatilemarkets, at least one segment of the Street is reveling in it. In spiteof, or perhaps due to the May 6 "Flash Crash," options trading volumeset a new record in May. According to figures published by The OptionsClearing Corporation, 408,432,157 options contracts were traded inMay, far surpassing the next two closest months for volume in the pastyear (March and April, respectively).

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Below is a chart of thelast twelve months of options volume (click to enlarge):

TheWall Street Journal reported that the climb in broad marketvolatility enabled the Chicago Board Options Exchange extend its leadover rival markets in a month that saw more options contracts changehands than at the height of the credit crisis in late 2008.

May 6was the busiest single trading day in history for the CBOE, with arecord 10.6 million contracts traded during the dramatic session.

Heavytrading in the CBOE's proprietary index options --key franchisesunderpinning the company's planned IPO -- lifted its share of total U.S.options activity to 32.4% in May. That hefty percentage came asinvestors traded more than 33 million index-linked contracts during themonth.

May options volume hit two high marks: the "Flash Crash"on May 6, and again on May 20, the day before expiration (click to enlarge):

As the FinancialTimes reported, "exploding volatility has driven traders to[CBOE's] proprietary stock index options, such as the Volatility Index,or VIX, often referred to as ìWall Streetís fear gauge.î

Evenexcluding the May 6 anomaly, 2010 appears to be well on its way tosetting another record for options volume (click to enlarge):