Henry Schwartz, President of Trade Alert led a panel discussion on sourcing liquidity at today’s Risk Management Conference in Dana Point, CA. The panelists were William Bartlett from Parallex Volatility Advisors, Jean Cayla from Optiver, Michael Khouw of Optimize Advisors and Tradelegs, and Stephen Solaka from Belmont Capital Group.
The session started off with a presentation covering trends in the option industry with respect to volume and order types. One interesting statistic was from 2009 to present the number of ETF’s with options available for trading has more than doubled from 308 to 634. The fastest growth area has been index options with average annual volume growth of 13.21% over the last 10 years. On an average trading day the premium value of SPX options constitutes 45% of the total premiums for the whole US market.
The second half of the session covered questions regarding liquidity in the option market. The first question was about liquidity in single stock options and it was noted that to get a big order executed it is a process rooted in calling around and seeking out liquidity. There has been a huge shift where market participants can seek out liquidity at a lower price as the markets have become more competitive.