December 3, 2018 • Christopher Robbins
More advisors have warmed to using options and products that use options in their portfolios in 2018. They have been encouraged by both more volatile markets in stocks and bonds and by the increasing ease and efficiency of applying the strategies. In October, amid several volatile weeks for U.S. equities, the Options Clearing Corporation cleared a record 567.8 million options contracts, up 48.9% from October 2017’s volume of 381.5 million. According to the Chicago Board Options Exchange (“Cboe,”) October set a new monthly volume record for S&P 500 options, at 41.4 million contracts traded. The four months with the most total volume of S&P 500 options traded have all occurred in 2018—and some of that growth is occurring via channels beyond high frequency traders and institutional advisors, according to Dave Donnelly, managing director at SpiderRock Advisors. “At the beginning of the summer, we were over $200 million in business,” says Donnelly. “Now we’re over $400 million.” SpiderRock is a Chicago-based technology-driven asset manager offering customized options strategies to advisors and institutions. The firm saw a 40% jump in AUM over the first half of 2018. According to Donnelly, advisors who use options strategies have prepared for and responded to this year’s volatility with hedging and beta management strategies. Options As A Differentiator While options have long been used in the institutional world, and are often used as part of an alternative fund or strategy, they have been underused by advisors so far, according to speakers at this year’s Inside Alternatives and Asset Allocation conference in Las Vegas. “The ultimate driving force for why advisors don’t use options in scale—or, well, at all—is because options are time consuming,” said panelist Eric Metz, SpiderRock’s president and CIO. “You have a finite amount of time. Using it to articulate to clients what options do might not be the best use of that time.” It takes time and confidence to get clients comfortable with using options, said conference panelist Eric Cott, director of financial advisor education at the Options Industry Council. For one thing, the nomenclature of options—with Greek letters like “rho,” “theta” and “gamma”—turns off both advisors and retail investors who may benefit from using the strategies. But in an era where most investment management is considered to be easily replicated, advisors can get a leg up if they can also discuss, access and use options, Cott said. “Options can provide differentiation in an era where advisors need to differentiate themselves,” said Cott. “Even advisors who believe options are not a dominant tactical tool that they’ll use all the time, instead of shying away from learning about options, they would do better to embrace them.” First « 1 2 3 4 5 » Next
More advisors have warmed to using options and products that use options in their portfolios in 2018. They have been encouraged by both more volatile markets in stocks and bonds and by the increasing ease and efficiency of applying the strategies.
In October, amid several volatile weeks for U.S. equities, the Options Clearing Corporation cleared a record 567.8 million options contracts, up 48.9% from October 2017’s volume of 381.5 million. According to the Chicago Board Options Exchange (“Cboe,”) October set a new monthly volume record for S&P 500 options, at 41.4 million contracts traded.
The four months with the most total volume of S&P 500 options traded have all occurred in 2018—and some of that growth is occurring via channels beyond high frequency traders and institutional advisors, according to Dave Donnelly, managing director at SpiderRock Advisors. “At the beginning of the summer, we were over $200 million in business,” says Donnelly. “Now we’re over $400 million.”
SpiderRock is a Chicago-based technology-driven asset manager offering customized options strategies to advisors and institutions. The firm saw a 40% jump in AUM over the first half of 2018. According to Donnelly, advisors who use options strategies have prepared for and responded to this year’s volatility with hedging and beta management strategies.
Options As A Differentiator
While options have long been used in the institutional world, and are often used as part of an alternative fund or strategy, they have been underused by advisors so far, according to speakers at this year’s Inside Alternatives and Asset Allocation conference in Las Vegas.
“The ultimate driving force for why advisors don’t use options in scale—or, well, at all—is because options are time consuming,” said panelist Eric Metz, SpiderRock’s president and CIO. “You have a finite amount of time. Using it to articulate to clients what options do might not be the best use of that time.”
It takes time and confidence to get clients comfortable with using options, said conference panelist Eric Cott, director of financial advisor education at the Options Industry Council. For one thing, the nomenclature of options—with Greek letters like “rho,” “theta” and “gamma”—turns off both advisors and retail investors who may benefit from using the strategies.
But in an era where most investment management is considered to be easily replicated, advisors can get a leg up if they can also discuss, access and use options, Cott said. “Options can provide differentiation in an era where advisors need to differentiate themselves,” said Cott. “Even advisors who believe options are not a dominant tactical tool that they’ll use all the time, instead of shying away from learning about options, they would do better to embrace them.”
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