Trading activity in the options niche of the financial markets exploded in early 2020, and that surge in activity has now persisted for almost three years.
With only a few days left in 2022, current estimates suggest that options trading volume in the U.S. will total more than 10 billion contracts for the first time in history. The total options trading volume during 2022 should be in the range of 10.4 billion, as compared to the 9.8 billion traded in 2021.
That number is even more impressive when one considers that the total options trading volume in 2019 was 4.9 billion contracts. In 2020, that figure jumped to 7.5 billion contracts, after central bankers around the world flooded the global economy with liquidity.
Interestingly, trading activity in single-stock options actually declined in 2022 as compared to 2021. But data compiled by the Futures Industry Association (FIA) indicates that trading volumes in both index and ETF options both increased in 2022, as illustrated in the graphic below.
Options Trading Volume
Additional data points from the 2022 trading year provide further evidence that the surge in volume first observed in 2020 isn’t going away anytime soon.
For example, during 2022, the average daily volume in the options market surpassed 40 million contracts for the time ever. For context, the average daily volume back in 2019 was less than 20 million contracts per day.
Additionally, in December 2022, the options market set a new record for the most-ever single-stock and ETF puts traded in a single day. That occurred on December 21, when over 2 million contracts exchanged hands.
Based on the aforementioned trends, it seems likely that options trading volumes will grow once again in 2023.
However, one has to keep in mind that 2022 was an especially volatile year. And elevated volatility tends to catalyze increased trading activity as investors and traders seek to capitalize on high-magnitude moves in the market.
If volatility were to contract sharply in 2023—and remain depressed for an extended period—that development could adversely impact options trading volume in the new year.
For a more detailed recap of the 2022 trading year—what worked and what didn’t—readers can check out these new installments of Options Trading Concepts Live on the tastylive network:
To follow everything moving the markets in 2023, monitor tastylive, weekdays from 7 a.m. to 4 p.m. CDT.
Sage Anderson is a pseudonym. He’s an experienced trader of equity derivatives and has managed volatility-based portfolios as a former prop trading firm employee. He’s not an employee of Luckbox, tastylive or any affiliated companies. Readers can direct questions about this blog or other trading-related subjects, to firstname.lastname@example.org.