- Retail investors’ primary motivation in options trading is portfolio diversification (32%)
- Retail investors embrace market volatility, with 62% trading options more frequently since the Covid-19 pandemic
- 82% turn to social circles for guidance and inspiration when trading options
- Options traders also invest in stocks (65%), cryptoassets (41%), and bonds (28%)
May 21, 2024 – According to a survey of American retail investors by trading and investing platform eToro, their primary reason for trading options was portfolio strategy diversification (32%), or implementing a particular trading strategy or approach. The survey found that the top three assets retail options traders are most likely to also invest in as a buy and hold strategy, are stocks (65%), cryptoassets (41%), and bonds (28%). In addition, among retail traders short term returns are no longer the leading use case of options, instead they’re seeking to enhance their overall investment strategy.
Since the COVID-19 pandemic, 62% of investors surveyed reported an increase in options trading activity compared to just 5% who have stopped trading options altogether. Furthermore, 61% of traders feel that through learned experience, they understand the risks of options and are more confident in their ability to mitigate downside risks. Meanwhile, only 15% of respondents reported feeling less comfortable taking risks. As with other survey findings from eToro of retail investors, there is a growing sophistication in their skills, at least by their own estimation.
Commenting on the data, eToro Investment Analyst Bret Kenwell said: “Following the COVID-19 pandemic where options volumes skyrocketed due to meme-stock activity and a strong bull market, retail traders developed a reputation for using short-sighted ‘short-squeeze’ strategies to take advantage of markets. Even if they may have entered the arena for the short term as a part of their strategy, it’s clear that retail investors haven’t been scared off by the market volatility and macroeconomic uncertainty of recent years. In fact, retail traders are sticking around and learning from their experience.”
When it comes to seeking inspiration and guidance for options trading, 82% of retail traders turn to their social networks (friends & family, social media, and online forums). Other top sources included their own analysis (48%) and media outlets (36%) such as news channels, financial websites and podcasts. Men reported higher levels of confidence in their own analysis (51%) compared to women (43%). Women turn to professionals in the media (39%) compared to men (35%), signaling there’s work to be done around womens’ confidence in their own analytical abilities. However, women are catching up, 46% of the women surveyed began trading options in the past three years.
Bret Kenwell commented: “Retail traders are evolving in how they use options. Traders have a focus on diversification, incorporating options as an alternative strategy among larger portfolio themes. Furthermore, they’re using a variety of strategies, such as credit spreads, showing a focus on ‘base hits’ rather than ‘home run’ trades. That said, many options traders are still relatively new to trading and as a result it’s not surprising that they’re most often turning to social networks for inspiration. But make no mistake, these traders are learning, evolving, and finding ways to utilize the various strategies that options present.”
ENDS
Notes to editors
About this report
The latest survey was based on a survey of 500 retail investors across the United States with a gender ratio of 65% men and 35% women. The survey was conducted from April 29th – May 1st 2024 carried out by research company Appinio. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent. They did not need to be eToro users.
Media contacts
pr@etoro.com
ellendi@etoro.com
About eToro
eToro is the trading and investing platform that empowers you to invest, share and learn. We were founded in 2007 with the vision of a world where everyone can trade and invest in a simple and transparent way. Today we have over 35 million registered users from more than 100 countries. We believe there is power in shared knowledge and that we can become more successful by investing together. So we’ve created a collaborative investment community designed to provide you with the tools you need to grow your knowledge and wealth. On eToro, you can hold a range of traditional and innovative assets and choose how you invest: trade directly, invest in a portfolio, or copy other investors. You can visit our media center here for our latest news.
DISCLAIMER
Securities trading is offered by eToro USA Securities Inc., member of FINRA and SIPC, a self-directed broker-dealer that does not provide recommendations or investment advice. Options involve risk and are not suitable for all investors. Please review Characteristics and Risks of Standardized Options prior to engaging in options trading. Content, research, tools, and stock symbols on eToro’s website are for educational purposes only and do not imply a recommendation or solicitation to engage in any specific investment strategy. All investments involve risk, losses may exceed the amount of principal invested, and past performance does not guarantee future results. Cryptotrading is offered by eToro USA LLC. This entity is not a registered broker-dealer or FINRA member and your cryptocurrency holdings are not FDIC or SIPC insured. Visit our Disclosure Library for additional important disclosures including our Customer Relationship Summary. FINRA Brokercheck © 2023