Advisors Warm to Options. Now What?
| Feb 6th, 2007 | Filed under: Portable Alpha & Alpha/Beta Separation | By: Alpha Male |
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“Online Options Trading is Getting Cheaper”
By: Aaron Siegel, Investment News
Published: February 5, 2007
According to the CBOE, only 5-10% of financial advisors have ever used options. But Investment News says today that this may change with the introduction of new, cheaper ways to trade options online. James Bittman, director of program development at the Chicago Board Options Exchange’s options institute tells Investment News:
“I believe that this [5% to 10%] number is higher than several years ago, because of competition from traditional brokers moving into financial planning and because managements of the larger financial planning firms have in-creased options-trading capabilities. I believe that the future trend of financial advisers using options is one of slow to moderate growth. As more and more financial advisers become aware of options, they will use them.”
Investment News covers one example of this trend: OptionsHouse, a Chicago-based online service launched in January that now offers options on the cheap.
But what will (or should) these options be used for? We contend that providing advisors with the same basic tools available to hedge funds and institutions will unleash new possibilities for individuals to adopt alpha-centric investing strategies (e.g. portable alpha, 130/30, market neutral). No doubt, these tools can be dangerous in the wrong hands or if they are used to make levered directional bets. But used as hedging tools, they may someday allow individual investors to pick and choose only the risks they want to take, while hedging out other risk factors. In the long-term, we believe this is a good thing because it completes markets.
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