Retail Investors Flock to Derivatives for Income and Safety Pg 2

Post on: 13 Апрель, 2015 No Comment

Retail Investors Flock to Derivatives for Income and Safety Pg 2

Fidelity does not offer futures, however.

I wouldn’t rule it out over time but we don’t have the demand for it at this point, said Gregg Murphy, Fidelity’s senior vice president of brokerage products.

This year will be the second best in history for the options industry, with more than 3.5 billion contracts trading so far, according to The Options Clearing Corp. The best year was 2011, which saw an unusually high level of activity due to the U.S. credit rating downgrade in August 2011 and the Japanese tsunami earlier in the year, according to spokesman Binder. While the OCC doesn’t keep tabs on retail vs. institutional trading, the increase in the number of small trades involving between one and 10 contracts suggests retail investors are increasingly active, Binder said. (A contract is typically for 100 shares of the underlying security).

Brokerage firms are happy about the increase in options trading, and not just because they can charge more for the trades.

Active traders, highly educated with higher incomes, said options traders are one of our most attractive demographics at the firm, according to Joe Vietri, CEO of optionsXpress, a subsidiary of Charles Schwab (SCHW — Get Report ) .

Schwab will hold 2,800 derivatives seminars in its branches this year where it will reach 25,000 people live and another 5,000 through Webinars.

Retail Investors Flock to Derivatives for Income and Safety Pg 2

Vietri said younger clients like options since it allows them to trade with less money, while older ones like the potential for income generation. optionsXpress has also seen growth in futures trading, which it has offered for about 10 years, though where growth has been explosive is in options on futures.

Demand for options on futures typically comes from clients who start learning about options and become increasingly sophisticated.

All the strategies and everything that we’ve taught them about options applies to futures on options so they don’t have to learn sort of the different mechanics of the futures market, Vietri said.

When options were created in the 1970s, they were really designed to allow people to create income and hedge risk, Vietri said. Over the years I think options kind of got a bad name because they were associated with pure speculation. Now, however, you’re seeing much more usage of options for what they were really intended and what they were designed to do as opposed to speculation.

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