The options trading market has witnessed a notable increase in activity, with average daily volumes in US options climbing to 44 million contracts in 2023, up from 41 million in 2022, according to the Options Clearing Corporation. This surge underscores a transformative shift in the investment landscape, where options trading is no longer the exclusive domain of sophisticated investors but is increasingly embraced by retail investors.
Several factors have fueled this expansion, including the democratization of trading, industry innovations, and the introduction of more accessible product offerings. The once daunting complexity of options trading is being mitigated, facilitating wider adoption. A significant contributor to this growth has been the innovation in weekly index options, spearheaded by Cboe Global Markets, which has expanded its offerings to include options expiring every trading day, thereby popularizing zero-day-to-expiration (0DTE) trading.
The allure of 0DTE options has grown remarkably, with the Financial Industry Regulatory Authority noting a 60% increase in opening positions from January 2022 to January 2023, and an even more significant 75% rise among retail investors. This uptick in retail participation is partly due to better access to data and educational resources, with platforms like Reddit raising awareness and brokers offering educational materials to demystify options trading.
In response to the need for investor education, Cboe has established The Options Institute, a platform designed to equip both novice and experienced traders with the knowledge to navigate the options market effectively. As the market evolves, options are becoming a vital tool for portfolio enhancement, protection, and speculation on market movements.
This trend signifies a broader movement in the financial markets towards making advanced investment strategies more accessible to a diverse range of investors. The continued growth and evolution of the options market highlight the importance of education and informed decision-making for investors looking to leverage these complex instruments in varying market conditions.
