Sell-Off Brings Historic Options Trading Volume

Last week saw three of the largest volume days in the history of the Options Clear Corporation

Bernie Schaeffer
Mar 3, 2020 at 2:26 PM
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Two straight weeks in this space we've looked at individual stock charts, but the chaotic market conditions recently have made it fairly difficult to "pinpoint" any real trends among many individual equities or exchange-traded funds (ETF). Instead it may be more helpful to take a broader view of the trading activity we've seen, including the manic volumes taking place in the options pits.

In fact, the last full trading week saw three of the largest volume days in the history of the Options Clear Corporation. Only three times ever has total options volume exceeded 40,000,000 contracts, and two of those occurred this past week. On Thursday, Feb. 27, almost 44,700,000 contracts traded, three million more than the next closest number from 2011. The previous Tuesday saw 41.4 million contracts cross on the day.

For a more specific picture of how options traders reacted to the market sell-off, we can zoom in on the SPDR S&P 500 ETF Trust (SPY) and how the speculation shaped out around the most popular broad-market ETF. In the just the past five days, the largest increase in open interest on SPY occurred at the now in-the-money March 300 put, where almost 45,000 positions were added in the past week. Digging even deeper, we should also call attention to one of the week's largest trades, when on Thursday a trader seemingly opened roughly 19,500 May 270 puts, potentially betting on more downside in the coming weeks.

On the call side of the aisle, the most popular option by open interest added was the far out-of-the-money weekly 3/6 340-strike call. And though SPY puts outpaced calls by a 21.5 million to 13.2 million advantage during this time frame, the ETF's Schaeffer's put/call volume ratio (SOIR) still stands out at 1.31, since this is actually the almost least put-skewed the ratio has been in the past year. This last point may not be too surprising when you consider that call open interest is in the 100th annual percentile, while put open interest overall is just in the 34th annual percentile.

Taking a step back to get a better sense of the overall options activity on SPY, more than 5 million contracts were traded each day on the ETF, with this figure previously exceeded on a daily basis just seven other times in the past year. Volume in Tuesday's and Thursday's sessions actually smashed annual highs, with more than 7.5 million contracts traded in each session.

Before closing this general breakdown of the recent market madness, it only seems right to take a look at the Cboe Volatility Index (VIX) and the options activity around the Street's favorite "fear gauge." Looking at just the past five days, the VIX's March 29 call saw the largest increase in open interest, with more than 153,000 contracts added there. Only one other option -- the March 16 put -- saw over 100,000 positions added. The former contract is now home to the fourth most populated level of open interest for VIX, and the latter is actually the most populated put.

Small CotW Chart 1

Small CotW Chart 2

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, March 1.



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