Options Industry Midyear Review: Index Products Lead Growth

As we enter the second-half of 2023, let’s review how the options industry fared in the first six months of the year and what year-to-date performance indicates for the next six months.

Nearly 2.6 billion option contracts traded market-wide in the second quarter of 2023 as large cap equities rebounded from first quarter lows and the general level of concern among investors decreased, leading to lower volatility and a quarter-end Cboe® VIX® Index close of 13.59 – more than 5 points below March 31 levels. Across all products, daily volume averaged near 42 million contracts, a decline of 7% from the record levels set in the first quarter.

Listed Option Volume

Source: Cboe Datashop

Index option volume increased in the second quarter, up 2% to 3.68 million contracts daily, while ETF option volume dipped 10%, to 16.7 million contracts daily, and single stock option volume dropped 7% to 21.5 million.

Total volume among index products outperformed ETF and single stocks in the second quarter, with SPX® average daily volume up slightly, and significant pickup in VIX options (+7.5%), XSP (+11.7%), RUT (+9.5%) and NDX (+22.5).

Index Option Volume Leaders Q2 2023

Source: Cboe Datashop

There was little change in the top five single stock options, with Tesla leading Apple for the fourth straight quarter, while a surge in AI-related names pushed Palentir Technologies up 11 places into the top 10.

Top Ten Single Stock Options

Source: Cboe Datashop

Average Daily Options Volume for Apple and Tesla

Source: Cboe Datashop

Among ETF options, the top product mix was unchanged despite a drop of nearly 10% in SPY average daily volume and a 1% decline in QQQ. Changing flows were evident in the lower half of the leaders, with Brazil-focused EWZ up a notch to sixth place and the regional banking ETF, KRE, falling four spots to number 10 as the banking collapses that made headlines in March faded from view.

ETF Option Volume Leaders Q2 2023

Source: Cboe Datashop

Based on year-to-date volume through June 30, 2023 is expected to be the fourth record year in a row with nearly 11.2 billion contracts trading, 900 million above 2022. Option volume has doubled since 2019 as a convergence of conditions and catalysts brought new participants and new products into a market already seeing benefits of decreasing friction and ongoing innovation. Following the growth seen in recent years, it’s safe to say the next six months will be busy as the markets continue to evolve to serve the needs of existing and new participants near and far. 

All data sourced from Cboe DataShop Option Sentiment

^{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. © 2023 Cboe Exchange, Inc. All Rights Reserved.}