Options Volume

Discussion in 'Options' started by Grant, Oct 15, 2006.

  1. Grant

    Grant

    Tower,

    Thank you for the detailed reply.

    As a CME pro, may I ask for your comments on the following (my knowledge is restricted to the European indices DAX, STOXX, FTSE, CAC)?

    A recent discussion on ET concerns options and futures volume. Options volume on S&P and e-mini is relatively light. Why? Are they badly priced?

    Why the lack of US (and foreign) institutional participation? Don’t they hedge/enhance returns via options, or is the OTC market better?

    If OTC, is it the anonymity or flexibility? I doubt whether relative price is a factor as this would create a long (short) OTC vs exchange. Perhaps this is the point. One side of a party in an OTC trade may lock in a certain profit and eliminates exposure but foregoes greater potential (and exposure).

    US equity options have massive volume, but this shouldn’t necessarily divert potential funds from index options. Or maybe it does – money seeking opportunity, etc (but I would assume success here is based on price, not value, unless everyone is selling).

    Volume for e-mini S&P futures volume is massive. While options allow a geared play on the underlying, I suspect the relatively low cost of participation in the e-mini makes directional option plays redundant. But this begs the question, if the lower cost of the e-mini future means greater participation, why isn’t this reflected in a concomitant increased participation in the lower cost opportunity of e-mini options?

    If you have better things to do than reply to speculation, I’ll understand.

    Good luck with the system. (What does this switch do? Why have the screens gone screens blank? Why are you crying?).

    Grant.