Options volume on expiration light due to Boston lockdown

NEW YORK, April 19 Fri Apr 19, 2013 11:53am EDT

NEW YORK, April 19 (Reuters) - Options trading volume on Friday was unusually light as much of Boston, a major U.S. financial center, was under lockdown as police hunted for a suspect in Monday's Boston Marathon bombings.

As of 10:30 a.m. (1430 GMT), about 5 million contracts traded in the options market. Some market participants said this was low for the morning session, given Friday is monthly options expiration, which tends to be a heavily traded session.

"I would say the volume now is about half of what it should be on an expiration day, especially during morning trade and after the slew of earnings we had this week," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

With major mutual funds in Boston including Fidelity Investments, Pioneer Investments and Eaton Vance Corp, order flow was expected to be lighter-than-usual, although a number of Boston-area sources interviewed said many people could work out of their homes. Those who started work early in the morning were already in their offices.

In the Boston manhunt, police killed one suspect in a shootout Thursday night and were searching for a second man Friday. The streets in the city's financial center were deserted after authorities urged people to stay home.

About 19.8 million contracts traded daily on average during the past three expiration dates this year, according to data by OCC, an options clearinghouse.

"On expiration day, as you would expect, there was heavy volume in stocks, futures and options in the first few minutes of the trading session. But as many traders are distracted by the events in Boston, the depth of markets seems to be slightly less than normal leading to quicker moves in many of these products," said TD Ameritrade chief strategist JJ Kinahan in Chicago.

Still, volume could pick up. According to options analytics firm Trade Alert, the options market is projected to trade 20.4 million contacts on Friday, which is more than the average of the past three expirations this year.

Jared Woodard, a principal of research and advisory firm Condor Options at Forest, Virginia, said option volume in the SPDR S&P 500 Trust, the most actively traded exchange-traded fund, averages around 2.5 million contracts per day and as of 11:17 a.m., the volume was about 1.5 million contracts.

"So that reflects plenty of activity on options expiration," he said.

Options expiration occurs monthly when the life of an options contract ends.

Ed Boyle, senior vice president of strategy at the BOX Options Exchange, said the exchange, based in Boston and accounting for about 2.1 percent of volume in single-equity and index options, said the exchange was open. "The Boston activity has not affected trading at BOX in any way," he said in an email.

Investors who reached their Boston offices prior to the police lockdown could continue to trade, even if they couldn't leave their buildings.

"We're in the John Hancock building, the tallest in Boston, and we're on complete lockdown. Of course, you can work remotely and our securities business is processed in another building, so that's not holding us up," said David Porter, managing partner at Baystate Financial Services in Boston.

"There's nothing we're unable to do because of this, except go outside."