The options market, where the sophisticated traders hedge their bets, is taking to exchange traded funds (ETFs) rather than individual equities.

Higher market volatility has ended up in higher costs for traders, especially with specific stocks. David Gaffen for The Wall Street Journal reports that the wild rise in equities has actually driven more traders to do their business with ETFs.

The broad ETFs are getting the most attention and they are staying flexible and nimble for the traders, thanks to the diversification they offer.

While option trading in individual equities is still more popular than ETF options or options trading in an index, ETF volume has been increasing rapidly, up 159% from a year ago in September.

According to the Chicago Board Options Exchange (CBOE), index option trading volume increased 69% in the same time period.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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