by Mark S. Longo 10/09/08
The short-sale ban has expired -- but that doesn't mean that we didn't have a wild ride in the month of September.
There has been a lot of talk about the explosion of options volume that took place in September. There certainly is a great deal to celebrate.
Overall options volume amounted to 374,531,673 contracts last month. That is an incredible 84% jump from September 2007. The options market also set a new record for monthly volume, surpassing the old record from July by 2.3%.
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Equity options volume also set a new record in September. 341,301,652 equity option contracts changed hands last month. That is a nearly 87% increase from September 2007.
If that wasn't impressive enough, two new daily volume records were also set last month. More than 26 million contracts changed hands on Sept. 17. That stunning total was immediately surpassed on Sept. 18 when options volume exceeded 30 million contracts.
With so many new records on the books in September, the term "banner month" is an understatement of epic proportions. Unfortunately, the SEC had a surprise up its sleeve that would quickly send a chill throughout the world of options.
Short-Selling Ban Breaks the Options Market
Despite a flurry of new volume records, all was not rosy in the options market last month. When you dig beneath the surface of the volume numbers, the impact of the SEC's recent short selling ban comes into stark relief. In virtually every sense of the word, the SEC broke the options market in September. (Read "Black Monday Redux" Sparks VIX Rally, But Short Selling Ban Stifles Options for more information.)
There's no better way to illuminate this than by looking at the daily volume numbers from September:
SEPTEMBER BY THE NUMBERS
DATE | OVERALL CONTRACT VOLUME | |
9/2 | 13,055,423 | |
9/3 | 13,854,839 | |
9/4 | 17,251,942 | |
9/5 | 15,377,943 | |
9/8 | 18,097,244 | |
9/9 | 19,286,103 | |
9/10 | 17,860,080 | |
9/11 | 18,958,697 | |
9/12 | 17,871,710 | |
9/15 | 21,866,318 | |
9/16 | 25,164,093 | |
9/17 | 26,747,401 | New Daily Volume Record |
9/18 | 30,034,196 | New Daily Volume Record |
9/19 | 23,306,211 | September Options Expiration, SEC Ban Goes Into Effect |
9/22 | 13,690,202 | MM Exception, Volume Down 41% from 9/19 |
9/23 | 13,887,524 | |
9/24 | 11,636,573 | |
9/25 | 12,922,483 | |
9/26 | 12,171,889 | |
9/29 | 17,853,466 | Dow Drops 778 Points, VIX Surges 39% |
9/30 | 14,073,463 |
Pre-Ban (9/2-9/19) Avg. Daily Volume: 19,909,442
Post-Ban (9/22-9/30) Avg. Daily Volume: 13,747,942
Michael Shulman
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