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I just wrote a post titled, “Top 10 Stocks with the Most Options Liquidity” so you may want to check that out as well. However, I purposely wanted to separate the ETF’s into a list of their own because SPY, QQQ, IWM, and TLT would have occupied to much space on that list. Additionally, I was just curious what other ETF’s may be crowd favorites as of today.
Here is what I found.
Top 10 ETF’s with the Most Options Liquidity
1. Xtrckr Hrvst CSI 300 China A – ASHR
First up is ASHR and to be completely up front I have no idea what ASHR even is. For those in a similar boat, here is a link to the Xtrackers ASHR website for more information. I’ve never personally traded here but upon inspection it looks like the liquidity can be in pockets for some expirations. Regardless, they are one of the most liquid ETF’s currently available, for reasons unknown to me.
2. iShares China Large Cap – FXI
Possibly FXI and ASHR serve as a proxy here in the US for playing the Chinese market, I’m not sure. However, for anyone feeling like taking their options strategies international FXI has you covered. Moreover, FXI and ASHR have lower share prices so just about any strategy can work. I know I’d feel more comfortable owning shares of an ETF than a single stock if I were trading a covered call or cash secured put.
3. iShares iBOXX High Yield Bond – HYG
This must be where players go that want to earn an income from their bond portfolios. In truth, I haven’t yet considered that for the few hundred shares I hold in SPHY but I’m intrigued none the less. There doesn’t appear to be much liquidity away from the money on either the calls or puts but there is plenty right at the money for those interested.
4. iShares Russell 2000 – IWM
The first of the four I mentioned earlier arrives here on our top 10 list of ETF’s with the most options liquidity. IWM has been a staple for me over the years and I’ve traded almost every strategy I know there. Admittedly, I prefer IWM to even SPY or QQQ which are the two most liquid ETF’s. I have never had an issue getting filled on IWM and I don’t see that changing anytime soon.
5. Kraneshares CSI China Internet – KWEB
What is going on with all the China focused ETF’s for options trading? I’ve been trading options for going on 20 years and have never once thought, I need to look at China for this trade. In any case, apparently I’m the only idiot and there is plenty of love in these markets.
6. Invesco QQQ Trust – QQQ
Next is the most popular “technology” ETF here in the US. Although, it is a collection of the biggest non-financial companies in the US. In any case, QQQ has been another staple for my own options accounts over the years. QQQ, TLT, IWM, SPY, and GLD are the ETF’s I think of most when I want to consider an options strategy. From there, I may branch out but I almost always start my research with one of these ETF’s.
7. Vaneck Semiconductor – SMH
If you’re wanting to get in on all the fuss around semiconductors SMH has you covered. This space has been buzzing for the last 3-5 years and in that time the SMH share price has increased over 300%. However, liquidity does get lighter at the further out expirations. I’m not sure that’s a deal breaker but would make me think that shorter term trades might be more appropriate.
8. SPDR S&P 500 – SPY
This list is in alphabetical order. Otherwise, SPY would be at or near the top. I honestly don’t know a single options trader or market participant not familiar with SPY. Generally, if I’m wanting to trade an options strategy I’ll look to SPY or one of the other ETF’s mentioned previously as a starting point. If I were creating a personal list of top 10 ETF’s with the most options liquidity SPY would be the very first for me.
9. iShares 20+ Year Treasury Bond – TLT
I haven’t traded TLT since it fell in 2022 but at $89 per share for a relatively stable ETF it’s hard to beat. TLT also offers a respectable yield for those wanting to deploy a similar strategy to the one I mentioned for HYG. Over the years, I’ve held TLT shares, traded them short, and deployed countless options strategies with no issues.
10. Select Sector Industrial SPDR – XLI
I expected to see one or more of the SPDR sector ETF’s on this list but I’m not sure I’d have thought it would be industrials. I was expecting to see XLK, the tech sector ETF. Still, if you’re interested in focusing your efforts to one of the core sectors of the economy XLI or most any of the SPDR Select Sector ETF’s could work. I’ve included the link in case you want to check them out.
Final Thoughts
There it is, the current top 10 ETF’s with the most options liquidity. Many of them I fully expected but there were a few surprises along the way. Namely, the number of China based ETF’s with ample options liquidity. So, if you’re looking for that next options strategy I think you’ll be well served as you consider this list of ETF’s.
If you’re looking for a strategy to get you started and want to skip the trial an error of the most common options strategies. Have a look at this post I wrote last week, “Exotic Options Strategy I Just Can’t Stop Considering”. Full disclosure though, it is an advanced options strategy and may not be suitable for everyone.
Until the next post.
God bless,
Jeff
