Index Options Trading Heats Up

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Traders are rushing to options bets tied to major indexes, looking to profit from the stock market’s wild swings.

Roughly $1.3 trillion worth of index and exchange-traded fund options have changed hands a day over the past month, as traders have tried to navigate the uncertainty stemming from inflation and the path of Federal Reserve interest rate hikes, according to Goldman Sachs Group Inc. analysts.

The trend marks a shift from much of the past two years, when options tied to individual companies—particularly bullish call options—were in vogue as stocks kept soaring. Those wagers have declined in popularity, the firm said, as a challenging macroeconomic environment has led to a surge in index trading.

The heavy trading has led to a build-up of options that expire this Friday in particular. Watch for a heavy burst of activity toward the end of the week, when $3.4 trillion worth of options expire, according to Goldman, an unusually high figure. That includes $1.9 trillion worth of options tied to the S&P 500 index in particular.