Jan 25, 2024
As we welcome 2024, let us review how the options industry fared in 2023 and what 2023 performance indicates for the new year.
U.S. options volumes industry-wide set another record in 2023 as more investors seek the utility and flexibility derivatives provide to manage risk and generate income. 11.11 billion option contracts traded market-wide in 2023 with daily volume averaging 43.3 million contracts, an increase of 6.8% from one year ago.
As inflation persisted in the second half of 2023, many investors became wary of the high valuations of stocks and shifted their portfolios to safer assets such as bonds. The economic outlook also deteriorated, as both the manufacturing and service sectors showed signs of slowing down. Moreover, the leading indicators and the shape of the yield curve suggested that a recession might be looming. The $Cboe Volatility Index(VIX)$ closed at 12.45 at year end.
In particular, on Cboe, we noted the following 2023 volume highlights:
· Total volume across Cboe's four options exchanges was 3.7 billion contracts in 2023, making it the fourth consecutive record-breaking year.
· Total options ADV reached an all-time high of 14.6 million contracts traded per day in 2023.
· Cboe's proprietary product suite set several volume records for 2023, including:
· $S&P 500(.SPX)$ options traded a total of 729.3 million contracts, with an ADV of 2.9 million contracts.
· $Cboe Volatility Index(VIX)$ options traded a total of 185.7 million contracts, with an ADV of 743 thousand contracts.
· Trading in SPX options set a new single-day volume record on December 14, 2023 with 4.8 million contracts traded.
Listed Option Volume
Source: Cboe Trade Alert
Overall, Index option volume increased 34% to 3.8 million contracts daily, and ETF option volume rose 12%, to 17.5 million contracts daily, and single stock option volume remained largely unchanged at 21.5 million.
Total volume among index products outperformed ETF and single stocks in 2023, with $S&P 500(.SPX)$ average daily volume at nearly 3.3 million contracts, and significant pickup in $Cboe Volatility Index(VIX)$ options (+7.1%), $S&P 500 Mini-SPX(.XSP)$ (+80.2%), $RUTSM (+10.5%) and $NASDAQ 100(NDX)$ (+16.3%). Options contracts expiring within one day or less account for approximately 36% of total U.S. index options flow in 2023, compared to 15% in 2020. The adoption of daily-expiring $S&P 500(.SPX)$ options in particular, has allowed many investors to trade and hedge risk with much more granularity and precision. Seeing this utility, we are excited to launch daily options on the Russell 2000 Index in January.
Index Option Volume Leaders 2023
Symbol | Total Volume | Option | Trade Count | Premium Traded | IV30 Low | IV30 High | ADV |
ADV | chg | ||||||
.SPX | 52,947,087 | 2,647,354 | 10,118,976 | 155,831,491,584 | 16% | 22% | 19.4% |
.VIX | 11,412,433 | 570,622 | 195,987 | 1,149,388,038 | 60% | 108% | 7.1% |
.XSP | 1,287,697 | 64,385 | 194,536 | 313,642,275 | 16% | 22% | 80.2% |
.RUT | 940,571 | 47,029 | 158,989 | 2,385,664,256 | 20% | 26% | 10.5% |
.NDX | 563,421 | 28,171 | 205,765 | 9,686,537,848 | 22% | 28% | 16.3% |
.DJX | 52,473 | 2,624 | 5,443 | 45,045,490 | 14% | 19% | 46.7% |
.MXEF | 51,195 | 2,560 | 453 | 91,784,380 | 17% | 22% | 57.2% |
.MXEA | 37,080 | 1,854 | 263 | 72,128,328 | 15% | 20% | -6.5% |
.NANOS | 29,270 | 1,464 | 3,103 | 50,762 | 13% | 25% | 76.6% |
.XND | 8,637 | 432 | 496 | 1,302,570 | 23% | 29% | - |
Source: Cboe Trade Alert
Top Ten Single Stock Options
There was little change in the top four single stock options, with Tesla leading Apple for the fourth straight quarter. One notable development was the comeback of $Bed Bath & Beyond(BBBY)$ in 2023, after it filed for bankruptcy in April and was acquired by Overstock (OSTK), a competitor in the home furnishings sector, in August. BBBY, which had a strong following among meme stock traders, rose to the fifth spot in the ranking of the most traded single stock options in 2023.
Symbol | Total Volume | Option | Trade Count | Premium Traded | IV30 Low | IV30 High | ADV |
ADV | chg | ||||||
62,912,096 | 3,145,605 | 9,704,885 | 91,766,642,624 | 57% | 87% | 91.8% | |
24,956,920 | 1,247,846 | 3,151,790 | 11,891,139,664 | 31% | 43% | -7.0% | |
22,656,605 | 1,132,830 | 2,394,716 | 24,188,218,836 | 47% | 54% | 56.9% | |
11,402,993 | 570,150 | 2,348,494 | 10,650,680,884 | 48% | 58% | -4.7% | |
10,379,734 | 518,987 | 1,071,641 | 575,555,962 | 193% | 439% | - | |
9,454,381 | 472,719 | 1,720,944 | 7,352,366,332 | 25% | 38% | 41.1% | |
8,589,089 | 429,454 | 1,420,477 | 12,372,457,416 | 54% | 67% | -17.4% | |
8,489,612 | 424,481 | 1,177,842 | 5,273,540,276 | 51% | 57% | -27.6% | |
7,679,903 | 383,995 | 717,333 | 768,248,840 | 143% | 190% | 8.0% | |
6,386,878 | 319,344 | 1,645,319 | 12,082,449,440 | 37% | 67% | - |
Source: Cboe Trade Alert
Average Daily Options Volume for $Apple(AAPL)$ and $Tesla Motors(TSLA)$
Source: Cboe Trade Alert
Among ETF options, the top product mix was unchanged. We saw an increase of 20.7% in $SPDR S&P 500 ETF Trust(SPY)$ average daily volume and a 6.2% rise in $Invesco QQQ Trust-ETF(QQQ)$ .
Emerging markets showed a strong performance in 2023, surpassing developed markets in economic growth and new business creation. Investors were drawn to these key trends and sought to invest in large and mid-sized firms operating in emerging markets. This made the iShares MSCI Emerging Markets ETF (EEM) option one of the most popular ETF options in 2023, ranking fifth in trading volume.
Symbol | Total Volume | Option | Trade Count | Premium Traded | IV30 Low | IV30 High | ADV |
ADV | chg | ||||||
174,860,174 | 8,743,009 | 20,648,617 | 46,366,422,272 | 17% | 22% | 20.7% | |
56,105,281 | 2,805,264 | 5,247,994 | 25,709,229,488 | 23% | 29% | 6.2% | |
15,976,738 | 798,837 | 934,920 | 4,455,034,464 | 20% | 26% | -3.7% | |
9,771,702 | 488,585 | 69,776 | 1,136,936,273 | 9% | 13% | 4.1% | |
9,496,840 | 474,842 | 75,881 | 2,292,468,885 | 17% | 22% | 135.7% | |
8,477,301 | 423,865 | 978,034 | 697,297,326 | 67% | 85% | 13.6% | |
6,333,965 | 316,698 | 91,154 | 764,607,117 | 28% | 39% | - | |
4,509,203 | 225,460 | 305,711 | 2,378,105,472 | 17% | 22% | - | |
4,371,810 | 218,591 | 172,460 | 301,662,897 | 17% | 24% | 11.3% | |
4,130,309 | 206,515 | 309,164 | 512,859,651 | 47% | 58% | - |
Source: Cboe Trade Alert
As the global economy enters 2024, investors will face multiple challenges and opportunities in managing their portfolios. The Fed's policy stance remains unclear as it balances inflation and growth concerns. The political landscape is also uncertain, with several major elections around the world that could have significant implications for trade, security, and stability. Therefore, investors need to be agile and flexible in accessing global markets and hedging their risks. Liquidity and risk management tools are essential for navigating this complex environment.
There are important risks associated with transacting in any of the Cboe Company products or any digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: https://www.cboe.com/us_disclaimers/. These products and digital assets are complex and are suitable only for sophisticated market participants. These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position. Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle. © 2024 Cboe Exchange, Inc. All Rights Reserved.
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