Options trading activity hits record powered by retail investors, but most are playing a losing game

Dec 22, 2021

Observations & Insight

EDITOR’S NOTE: JLN Options is taking a holiday for the Holidays and we will not publish the Options Newsletter between now and the New Year. We will return on Monday, January 3. We wish everyone a very happy holiday and a great new year!

Lead Stories

Options trading activity hits record powered by retail investors, but most are playing a losing game
Yun Li – CNBC
A record of 39 million options contracts have traded daily on average this year, rising 35% from 2020. Retail investors now account for more than 25% of this trading activity.
However, the majority of these small-time traders are buying the most basic call and put options, which have a much lower probability of profit compared with advanced strategies like options spreads.
“Everybody in the business knows that if you’re only buying out-the-money calls, then you’re likely going to lose money over time,” said John Foley, CEO of Options AI.

This Month’s Quadruple Witching Sets New Record
ETF Trends
Quadruple witching day comes four times a year, and this most recent one brought with it record trading volume during the closing auction for the NYSE.
“Last Friday’s Quadruple Witching (12/17/21) was historic in the sense that it was the heaviest trading volume day on the NYSE Closing Auction ever at 2.4 billion shares (previous high was 2.3 billion shares),” wrote Paul Weisbruch, ETF/options sales and trading for GTS Mischler, in a communication.

Stocks Up After S&P 500 Rally
Joe Wallace and Karen Langley – WSJ
U.S. stocks climbed for a second day as strong economic data helped ease investors’ concerns about the risks posed by Covid-19 and inflation.
The S&P 500 rose 0.8%, adding to Tuesday’s 1.8% advance. The Dow Jones Industrial Average gained 0.6%, or about 220 points, while the tech-heavy Nasdaq Composite advanced 0.8%.

Stoxx 600 Index: European Stocks Steady Ahead of Holiday Break
Joe Easton – Bloomberg
European equities rose to a two-week high in muted pre-holiday trading as investors weighed omicron lockdown risks against optimism that growth can continue.
The Stoxx Europe 600 Index closed up 0.9%, with technology leading the gains. Travel and leisure advanced after U.K. Prime Minister Boris Johnson ruled out stricter pandemic restrictions before Christmas, but airlines later trimmed gains as Ryanair Holdings Plc cut its forecast due to the omicron variant’s spread.

Dollar regains ground as volatility starts to fade
Alun John – Reuters
The Aussie and Kiwi dollars on Wednesday, gave up some of their gains from the day before, as a rally in riskier asset classes began to lose steam, though moves were muted as traders started to head out for the holidays.


CME Group Inc. Announces Fourth-Quarter and Year-End 2021 Earnings Release, Conference Call
CME Group
CME Group Inc. will announce earnings for the fourth quarter and full year of 2021 before the markets open on Wednesday, February 9, 2022. Written highlights for the quarter will be posted on the company’s website at 6:00 a.m. Central Time, the same time it provides its earnings press release. The company will also hold an investor conference call that day at 7:30 a.m. Central Time, at which time company executives will take analysts’ questions.

Nodal And IncubEx Expand World’s Largest Exchange Listed Environmental Derivatives Suite to 100 Distinct Contracts
Business Wire
Nodal Exchange and IncubEx today announced the upcoming launch of four brand new environmental futures on January 7, 2022, bringing the largest market for environmental products in the world to 100 futures and options contracts.

ICE Benchmark Administration to Launch GBP SONIA Spread-Adjusted ICE Swap Rate as a Benchmark on January 4, 2022
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of data, technology, and market infrastructure, today announced that ICE Benchmark Administration Limited (IBA) plans to launch GBP SONIA Spread-Adjusted ICE Swap Rate for use as a benchmark in financial contracts and financial instruments by licensees on January 4, 2022.


The Options Market Is Now a Casino. Here’s How to Bet Wisely.
Steven M. Sears – Barron’s
Let us end 2021 reflecting on a powerful lesson we learned this year: America is a nation of gamblers, and the options market has become the biggest casino in the country.
Pundits and strategists may talk about the merits of long-term investing, but the chance to make a quick buck is a virus more powerful than any Covid-19 variant.


The Paranoid Style in American Investing in 2021
Chris Bryant – Bloomberg
“Every age has its peculiar folly; some scheme, project, or phantasy into which it plunges, spurred on either by the love of gain, the necessity of excitement, or the mere force of imitation.
Failing in these, it has some madness, to which it is goaded by political or religious causes, or both combined.”

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