An Anatomy of Retail Option Trading

55 Pages Posted: 25 Jan 2024 Last revised: 9 Feb 2025

See all articles by Vincent Bogousslavsky

Vincent Bogousslavsky

Boston College - Department of Finance

Dmitriy Muravyev

University of Illinois at Urbana-Champaign - Department of Finance; Canadian Derivatives Institute

Date Written: January 2, 2024

Abstract

The recent surge in retail option trading has sparked concerns about trading motives and large losses.  We offer the first trader-level analysis of modern retail option trading by introducing a novel data set of $15 billion in retail stock and option trades. In our data, option trades constitute over one-third of all trades, concentrate in few underlyings, especially the S&P 500 index, and are dominated by short-term purchases with almost no covered calls or protective puts. Option trades incur modest losses compared to wide bid-ask spreads. Retail investors use options to participate in high-priced underlyings, with little leverage or skewness-seeking in realized trade returns. Our retail investors are relatively sophisticated on average but exhibit remarkable heterogeneity, with the main findings  holding across investor styles.

Keywords: retail trading, options, investor behaviour, trading motives

JEL Classification: G10, G12, G14

Suggested Citation

Bogousslavsky, Vincent and Muravyev, Dmitriy, An Anatomy of Retail Option Trading (January 2, 2024). Available at SSRN: https://ssrn.com/abstract=4682388 or http://dx.doi.org/10.2139/ssrn.4682388

Vincent Bogousslavsky

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Dmitriy Muravyev (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
217-7213772 (Phone)

Canadian Derivatives Institute ( email )

3000, chemin de la Côte-Sainte-Catherine
Montréal, Québec H3T 2A7
Canada

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