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Portfolio > Alternative Investments > Private Equity

Record Options Trading Volume In June

By Staff Writer

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CHICAGO (HedgeWorld.com)–At the Chicago Board Options Exchange it was the best of times and it was the worst of times in the month of June, depending on which side of the equity option an investor is on.

Market speculators are active and have mainly taken a negative bent so far this year at the CBOE, the world’s largest options exchange. Taking into account a weak market to begin with various accounting scandals, insider trading and an economy trying to correct itself, it should come as no surprise that the total index volume of the CBOE was up 31% over last June’s exchange volume.

A majority of the contracts for the year-to-date were puts of the total 39 million contracts were issued. Puts, which are right to sell a stock at a certain price, accounted for 22 million of those contracts. A higher number of puts often indicates a bearish market.

Options on the Dow Jones industrial average showed a gain this past month. A total of 1 million contracts traded, an increase of 87% from June 2001′s amount of 618,738 contracts. At the end of June, year-to-date volume in the Dow options was at 5 million, which is up 24% versus the year-to-date total of 4 million contracts through June 2001. Dow options open interest, which is the number contracts that have yet to be exercised or to expire, was at an increase of 25% over last year, according to the exchange.

Options on the S&P 500 index were the most heavily traded of the index options at CBOE in June. A total of 2.4 million contracts, representing an increase of 45% over June 2001 volume of 1.7 million contracts, were traded during the month. Open interest stood at 3 million, which is an increase of 13% over June 2001.

S&P 100 index options were also popular, up 72% in volume. Open interest was up 44% over last year with more than 232,000 contracts outstanding at the end of the month.

But the indicators are still a bit muddy with open interest in all listed options continuing to rise in June with 82 million contracts in total, the majority of which were calls (49 million). Calls are a right to buy a stock as a certain price. This may indicate investors’ potential for bullishness and represents an increase of 2% from June 2001.

OIC Figures

Across the equity options market records were set. According to the Options Industry Council, June equity options volume was the highest on record with 59 million contracts being exchanged. June equity options volume increased 6.8% over that of June 2001, which saw 56 million contracts change hands.

The Chicago-based industry association reported that the average daily equity volume for June rose 11.49% to 2.9 million contracts as compared with 2.6 contracts in June 2001. “Traditionally, options trading during the summer months is quiet – but not so far this year,” Paul Stevens, president of OIC said in a statement. “It’s encouraging to see that volume is high and investors are utilizing options as both a risk management tool for uncertain markets and a long-term investment vehicle.”

Equity open interest in June was also fervent with 83 million contracts still open, an increase of about 9% from the 76 million contracts qualifying as open in June 2001. Year-to-date June is the highest month-end for equity open interest. Equity open interest statistics are often seen as an indication of longer-term investing, according to OIC.

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