Trader Talk

Options Business Is Booming

Options business booming: record volumes in August, September.

While the trading since August have been full of volatility and high volume, for the most part that has not translated into notable stock outperformance for the major exchanges.

There is an exception: the CBOE. It is by far the best performing exchange in price: up 9.6 percent in August through Tuesday, the only exchange in positive territory, in a month where the S&P 500was down 5.7 percent.

The outperformance continues in September: up 4.7% while the S&P is down 3.8 percent.

Partly this is due to record trading in options in August and September. But there's an additional reason: anticipation — now a reality — that they would soon be launching their SPXpm pilot.

The CBOE has the exclusive license (good through 2018) to trade S&P 500 index options. This is one of, if not THE fastest growing asset classes. But it still trades in the options pit in Chicago.

But SPXpm will trade electronically. Traders are expecting this may be a HUGE product. Why? Because the existing product is already a huge product, and the history of other products that went electronic (like crude oil) showed exponential growth in the years after they were introduced.

It's now in a beta test, and is expected to launch at the end of September.

Another differentiator: this product will have a PM settlement, rather than the AM settlement of the floor product.

Bill Brodsky, CEO of the CBOE, will be live with me, Brian Sullivan and Amada Drury on "Street Signs" today at 2:20pm ET.

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