Technology is tearing down the walls to options strategies previously available only to the largest investors, and is helping more investors guard against market risk and take advantage of market opportunities.
That’s according to data released by the Options Clearing Corporation, which reveals that total US exchange-listed options volume topped 4.3 billion contracts in 2017, the third highest on record and up 4 per cent from 2016, according to
“Today’s renewed options market growth reflects a new generation of educated, client-focused financial advisors working with their clients to apply appropriate options strategies across portfolios,” says Eric Metz (pictured), CFA, Chief Investment Officer at SpiderRock Advisors, LLC.
This trend is echoed in a recent study showing that advisors use options in 21 per cent of client accounts and expect to increase use by 30 per cent. (Cerulli Associates: ”How Financial Advisors Use and Think About Exchange-Listed Options.”)
“Financial technology is opening these markets to investors who have never before been able to systematically access the benefits of options,” says Metz. “This comes at a time when investors of all sizes are looking for strategies to protect assets, target investment yields and manage risk.”
SpiderRock uses proprietary financial technology to build and manage investment strategies for all market conditions. According to Metz, investors are using a range of strategies in today’s markets, including:
Portfolio protection – Reducing downside exposure on the heels of the extended market run-up
Volatility management – Managing the amount of variation in the values of client portfolios as goals-based investing has become a focal point in financial planning
Putting new assets to work – Helping nervous clients with large cash positions deploy capital by implementing options strategies that pick market entry points below today’s all-time highs
Rebalancing – Reducing portfolio beta (in a tax efficient manner) back to initial strategic targets after experiencing portfolio drift
