EDIT: CNBC article, linked in this thread goes into more detail about Robinhood active trader profiles, like single-leg traders outnumber multi-leg traders more than 10 to 1.
Hopefully this puts things in perspective. Retail is not the tail that wags the option market dog. It’s a big chunk of the market to be sure, but dominating or even influencing the market as some narratives would have you believe? Not so much.
- Around 39M options contracts have traded daily on average this year, rising 35% from 2020 and the highest level ever – Options Clearing Corp.
- Retail traders represent more than 25% of total options trading activity due to access via commission-free brokers – Alphacution Research Conservatory. (The cited reference is paywalled, so I wasn’t able to dig into this further).
- The average daily notional value (volume multiplied by spot price) of traded single-stock options climbed to more than $450B in 2021, compared with $405B for stocks – Cboe Global Markets.
- Some caution: The increased engagement is attracting the attention of regulators like the Financial Industry Regulatory Authority. Wall Street’s self-regulatory arm is considering whether changes to the options rules may be warranted, including regulations around options account approvals, supervision and margin requirements. FINRA’s request for comment will be published in the coming weeks to solicit insight from exchanges and brokers about options trading and the risks involved.