Events

Professor Vincent Bogousslavsky
Associate Professor of Finance
Carroll School of Management
Boston College

The recent surge in retail option trading has sparked concerns about trading motives and significant losses. To evaluate these concerns, 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. Option trades constitute over one-third of all trades, are concentrated in a few underlyings, especially the S&P 500 index, and are dominated by short-term purchases. Surprisingly, option trades incur relatively small losses despite wide bid-ask spreads. Retail investors use options to participate in high-priced underlyings, with limited evidence of leverage or skewness-seeking in realized trade returns. While our average retail investor is relatively sophisticated, results remain robust across investor subsamples.