U.S. financial advisers are trading more options and those with the most assets are “significantly” more likely to use the derivatives than peers with smaller amounts, according to the industry's first survey.
Ninety-four percent of advisers overseeing at least $500 million bought or sold equity derivatives in the past year, while 78 percent of those with $100 million to $500 million made option trades, according to a Bellomy Research Inc. survey of more than 600 U.S. advisers for the Options Industry Council. That compares with 48 percent of advisers with $50 million to $100 million, and 36 percent managing less than $50 million.
“Advisers started to understand that they couldn't hide under their desks in 2009 and that they needed to start bringing more valuable ideas, and that started to open up the floodgates,” Eric Cott, OIC's director of financial-adviser education, said at a press conference at the OIC conference in Savannah, Georgia. “That timing could not have been better for us to be out in the field talking to advisers.” Cott took his position in 2009 after 15 years as a financial adviser.
The Chicago-based industry group backed by the U.S. options exchanges introduced an education program in 2009 to instruct financial advisers on how to use equity derivatives. Advisers increasing their use of options helped boost U.S. volume 8 percent last year to 3.9 billion contracts for an eighth- straight annual record, according to the OIC. Trading in March rose to a monthly record of 417.2 million contracts as stocks plunged after Japan's earthquake and tsunami.
“Options usage among advisers is responding to the current market conditions, as well as a shift in client attitudes,” OIC said in a report. “Clients are asking for ways to avoid the losses of the past few years again and enhance their returns in the current up market.”