How Retail Losses Money in Option Trading

Over the last few years, we may have noticed a significant growth in retail investing. No surprise, the COVID pandemic outbreak increased the numbers even more, and undoubtedly, options trading is no exception. According to the authors (de Silva, Smith, Co), retail traders seek options expecting spikes in volatility and, for that reason, incline toward firms with more media coverage. Furthermore, their trading increases around the time of firms’ earnings announcements. As a result, market makers benefit from the behavior mentioned above, which causes a large flow of money from retail to market makers.

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