Too Much Fear In The Chicago Pits

For once, option traders welcome a calmer market

When markets swing with blood-curdling abandon, terrified investors fret, pray--and buy options to hedge their investments. So it was during the market's wild ride in the first nine months of 1998, when options volume on the Chicago Board Options Exchange climbed 14% over the year before. But what would ordinarily be a blessing turned out to be a curse for options traders, who usually profit from active markets. Options prices rose so sharply and for so long that professional traders had trouble coping. Many of them withdrew from the market, fearing that they were taking on too much risk.

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