Retail traders are getting bigger than ever in US stock options

Retail traders were responsible for 18.3% of the total options activity in June, a record, the bank’s strategists led by Bram Kaplan wrote Friday in a note to clients on Friday. More than 60% of their orders were for contracts expiring a week out or less, with technology options being of the highest demand among single-stock trades.

Bloomberg

When it comes to technology stocks, it appears the retail options flow has been bullish, as opposed to equity exchange-traded funds where the options are offsetting holdings in the broader market. Nvidia Corp. and other artificial intelligence names have spurred the S&P 500 Index to repeated records in 2024, with demand for bullish call options at times running at a steep premium to puts as investors try to capture the rally.

“This likely suggests that investors use options as stock substitutes for better leverage access; on the other hand, they may use options as overlays on their long broad market ETF positions (e.g. covered call selling, protective put buying, etc.) for income and hedging,” the strategists wrote in the note.