Actual Retail Option Trading/Returns

Given wide bid-ask spreads, do retail option traders systematically bear large losses? In their January 2024 paper entitled “An Anatomy of Retail Option Trading”, Vincent Bogousslavsky and Dmitriy Muravyev characterize retail option trading in the U.S. by exploiting data from a trading journal that attracts retail investors by offering advanced tracking/performance verification tools. When users subscribe and link their brokerage accounts, their trades (past and future) are automatically imported by the journal and verified. Using data for 5,182 traders who initiated 2.1 million trades worth about $20 billion (of which about $8.8 billion involve options) during January 2020 through December 2022, they find that: (more…)