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US listed options volume surges in January

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US Listed Options volumes surged in January, while average bid/ask size drops to lowest in two years, according to the January 2016 TABB Options LiquidityMatrix (OLM).

“January’s stock-market pain was the options market’s gain, with US listed options volumes rising to its highest monthly reading since August,” says TABB Group options research analyst Callie Bost, who manages the OLM.
January’s resurgence of violent market swings were a boon to US listed options trading. Volume last month totalled 364.4 million contracts, 7.6 per cent higher than December’s total and 3.2 per cent higher than the year-ago January.

The S&P 500 Index dropped 5.1 per cent in January, with daily swings averaging 1.3 per cent on a closing basis. 

The CBOE VIX Index averaged 23.72 in the month, closing as high as 27.59 on Jan. 20 and as low as 19.34 on Jan. 5. Much of equities’ turbulence was tied to a plunge in oil prices and signs of a slowing economy in China.

Stocks’ volatility over the past several months has had a chilling effect on market makers, who have reduced their risk exposures in every month since September. The average bid/ask size at the top of the book was 144.2 contracts in January, around the smallest since November 2013. 

Market quality as measured by bid/ask spreads also deteriorated last month, with the average bid/ask spread climbing to 0.36, the widest since August.

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