One of the few certainties in the market is that investors will always search for new ways to profit. And there is one strategy that continues to gain popularity.
That’s because it enables investors to make money regardless if stocks go up or down. It also provides the potential for investors to score big gains with very little risk.
I’m talking about options. In response to market volatility and uncertainty in the past four years, options strategies continue to gain popularity with both institutional and individual investors.
While that has been beneficial to leading financial exchanges such as CME Group Inc (NASDAQ:CME) and IntercontinentalExchange Inc (NYSE:ICE) that carry options contracts, there is another financial exchange that offers unmatched exposure to growth in options trading volume.
The CBOE Holdings, Inc (NASDAQ:CBOE) is the undisputed leader in the domestic options market, boasting 28% market share while offering options on equities, equity indexes and exchange-traded funds (ETFs). Founded in the early 1970s, the company went public just three years ago, cashing in on the trend of financial exchanges going public.
Much like the stocks of other financial exchanges, CBOE Holdings, Inc (NASDAQ:CBOE) has been surging in 2013, with shares up 61% on the year. Take a look at the big gain below.
But the CBOE is different than the other publicly traded financial exchanges. As an options specialist, the CBOE Holdings, Inc (NASDAQ:CBOE) is the purest play on the options market. That places the exchange in a unique position to cash in on the growing popularity of options and increased market volatility.
And that’s exactly what is happening. The CBOE Holdings, Inc (NASDAQ:CBOE) continues to see impressive results from two of its most important proprietary contracts.
The first is its VIX (volatility index) contract, with both futures and options trading volume exploding in the past year.
July trading data showed that VIX futures volume was up 53% from last year, while VIX options volume was up 36%. That has VIX futures volume up 99% on the year from 2012, already breaking 2012’s volume record in the first eight months of the year. The growing popularity of the CBOE Holdings, Inc (NASDAQ:CBOE)’s VIX complex is a powerful engine of growth as traders continues to search for more opportunities to speculate on volatility and investors hedge unwanted portfolio risk.
|© Chicago Board of Options Exchange|
|The trading floor of the Chicago Board of Options Exchange in 2007.|
Looking to capitalize on the big popularity spike in VIX futures and options, the CBOE is on schedule to extend VIX futures trading by 45 minutes from its current closing time in September. Phase 2 of the initiative will enable its European clients to trade during regular domestic hours.