Investor demand for earnings is driving growth in the S&P 500 dividend futures and options market, an area where the U.S. has historically lagged behind Europe. These contracts, which speculate on cumulative dividend payments of companies like those in the Euro Stoxx 50 index, have been popular in Europe for hedging and speculation. However, the U.S. is catching up, with a 40% increase in CME's dividend futures trading volume in early 2025 and a doubling of open interest in S&P 500 dividend options since their launch in January 2024.
According to Nabeel Hossain, Managing Director at London brokerage firm Vanquish Capital, the growth in U.S. dividends is attracting investors to call options and call spreads, though not as steep as in European products. The U.S. market shows lower volatility compared to Euro Stoxx 50, highlighting cultural differences and active retail trading in the U.S.
Maxwell Grinakov, UBS's head of U.S. equity derivatives research, suggests that U.S. companies' reliable dividend payments contribute to higher long-term contract values. The potential for tech giants like Amazon to start paying dividends further boosts the S&P 500 futures curve. Despite potential volatility, the rise of options offers investors detailed insights into expected dividend payments.
