Retail Traders Keep the Market Afloat with Massive Options Trading

On a recent Friday, the stock market experienced a notable decline. However, an unusual trend emerged: retail traders stepped in with unprecedented force.

Record-Breaking Options Trading

• Over 108 million options contracts were traded, marking the busiest day ever for options trading.
• Retail traders predominantly bought call options, betting on a market rebound.
• Their buying power was 11% stronger than usual, the 24th consecutive week of such confidence—a record.

Buying the Dip: A Year-Long Trend

Throughout the year, retail traders have consistently bought stocks during dips, defying negative headlines on trade, politics, and the economy.

• This behavior has contributed to new market highs, even as hedge funds remain on the sidelines.

A Shift in Market Dynamics

• Traditionally, hedge funds were seen as the "smart money" driving the market.
• This year, retail traders have taken the lead, with the S&P 500 up nearly 2% post-Friday’s drop.

Brokerage Firms Benefit

• Charles Schwab, a major brokerage, reported stronger-than-expected earnings due to surging retail trading activity.
• Daily trades on their platform increased by 30% compared to last year.

Caution Amid Optimism

While some experts predict continued market growth, especially with November’s seasonal strength, they advise caution in the coming weeks.