The CBOE Futures Exchange reported that February 2012 was the second most-active trading month in its history with volume totaling 1,340,780 contracts.
That was an increase of 70 percent from the 789,734 contracts traded in February 2011.
Average daily volume was 67,039 contracts, the second-highest ever, and up 61 percent from the 41,565 contracts traded per day a year ago.
February's total trading volume trailed only the 1.8 million contracts traded in August 2011.
Compared to January, CFE total monthly volume rose 65 percent from 811,283 total contracts and average daily volume gained 65 percent from the 40,564 contracts per day during January 2012.
Separately, February trading volume for options on the Chicago Board Options Exchange and the all-electronic C2 Options Exchange, combined, totaled 101.5 million contracts. February's average daily volume was nearly 5.1 million contracts, a one-percent increase from February 2011 ADV of five million contracts and
a 12-percent increase from last month’s volume of 4.5 million contracts.
The Chicago Board Options Exchange is a market where stock options, Long-term Equity AnticiPation Securities (LEAPS), index options, and interest rate options are traded. The CBOE’s Futures Exchange is an all-electronic market where index futures and Gas-at-the-Pump futures are traded.
The lion’s share of the futures exchange’s growth came from trading in the CBOE’s Volatility Index (VIX). Futures trading volume in this index reached 1,338,471 contracts traded in February, an increase of 70 percent from the year ago volume of 788,908 contracts traded. This was up 65 percent from the 808,784 contracts traded in January 2012.
The CBOE’s Volatility Index tracks the market’s expectations of market swings over the next 30 days. It is constructed using the implied volatility of a number of S&P 500 options. Implied volatility is a theoretical value that traders and investors calculate to represent how much they expect the price of security will move, either up or down, in the future.
This index’s volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor’s fear gauge.”
For the month, average daily volume in VIX futures was 66,924 contracts, compared with 41,521 contracts per day a year ago and daily volume of 40,439 contracts in the previous month.
In addition to the VIX the other four most actively traded index and exchange-traded options at CBOE in February were were the S&P 500 Index (SPX), the Standard & Poor's Depositary Receipts (SPY), the QQQ Trust (QQQ) and the iShares Trust-Russell 2000 Index Fund (IWM).
The exchange’s market share in ETF options was 22.4 percent, up 2.8 percentage points from a year ago and up one percentage point from last month. Its share in equity options was down 0.2 of a percentage point from a year ago and up 1.6 percentage points from the previous month.
Meanwhile, the exchange’s market share in index options was 94.5 percent, even with a year ago and down 0.5 of a percentage point from the previous month.
February saw two product launches. On February 2, CFE launched futures trading on the Radar Logic 25-Metropolitan Statistical Area (MSA) RPX Composite Index (futures symbol: RPXCP). The index tracks U.S. residential housing values as a whole. Unlike other housing price indicators, Radar Logic's real estate index values are published daily and include all types of residential real estate closings. A total of 20 contracts traded during the first month.
On February 21, CFE launched trading of security futures on the CBOE Brazil ETF Volatility Index (VXEW). The VXEW Index reflects the implied volatility of the iShares MSCI Brazil Index exchange traded fund. In their first seven trading days, 100 VXEW security futures traded.
In the previous month, on January 9 to be exact, trading was started on CBOE Emerging Markets ETF Volatility Index (VXEM) security futures. This index tracks the Index tracks the implied volatility of the iShares MSCI Emerging Markets Index exchange traded fund. In February 1,125 contracts were traded of the product, compared with 1,956 contracts traded during January.
Tommy Fernandez writes for Money Management Executive.