Options trading is growing at a healthy pace, as investors try to hedge their portfolios, even as the major indices trade at record highs.
Options have traditionally been used for individual stocks wherein you acquire the right to buy or sell a security at a set price, but more investors are now buying options on market indiices and ETFs to help balnce their portfolios should a broad market decline occur.
Here's a sampling of CNBC's coverage this week.
David Kalti, OptionsXpress CEO, and Dennis Davitti, Credit Suisse head of derivatives trading, discus the market's explosive growth with Sue Herera.
Options trading is up 25% in the first half of this year and Kalti's firm is among those benefitting from it. New acconts there are up 21%, as "average investors take their portfolikos into their own hands," says Kalti. The company is trying to "demystify" the concept and "customers are starting to get it."
Davitti says "increased volatility" partly explains the increase in trading, but also notes that hedge funds are seeking "more leverage." He says the last five years have been an excellent "environment" to sell options. "
Lee Barba, INVESTools Chairman & CEO, tells Carl Quintanilla "we're seeing very active traders, who are comfortable and taking part of market volatility."
INVESTools, founded in 1983, offers investor education, trading and investing courses for average investors. It recently merged with Think or Swim, an online trading platform.
Barba about $175 million of INVESTools's $250 million in sales is options related.
Nasdaq In Focus
Stacey Briere Gilbert, chief options strategist at Susquehanna Financial Group , tells Sue Herera that investors are looking mainly at M&A activity and earnings in Nasdaq shares.
Although the Nasdaq is not approaching record highs like the Dow 30 or S&P 500, investors are bullishly buying Nasdaq's volatility because "when it moves, it can move a lot."