What Kind of Index Option Traders and Trades Are Profitable?

Overall, how do retail option traders perform compared to institutional counterparts, and what accounts for any performance difference? In their June 2021 paper entitled “Who Profits From Trading Options?”, Jianfeng Hu, Antonia Kirilova, Seongkyu Park and Doojin Ryu use account-level transaction data to examine trading styles and profitability by investor category for KOSPI 200 index options and futures. There are no restrictions in Korean derivatives markets on retail investor participation, and retail participation is high. Using anonymized account-level (153,835 domestic retail, 5,904 domestic institutional, 667 foreign institutional and 604 foreign retail) data for all KOSPI 200 index options and futures trades during January 2010 through June 2014, they find that:

(more…)