The bill climbs to US$5 billion when the cost of doing business with market\u002Dmakers is factored in
A few factors were at play, said the authors, among them hapless market timing by the retail group. Super-wide bid-ask spreads in their options of choice ate up a large portion of the cohort’s potential gains.Article content
But at the peak of the frenzy in 2021, small-time traders were buying more than 23 million call options a week, according to Options Clearing Council data compiled by Jason Goepfert at Sundial Capital Research. That’s way above any other period going back to 2000. Sundial defines small-time as a trader who buy or sells 10 or fewer contracts at a time.The derring-do of newcomers was frequently called out by Wall Street.
“The more they trade, the more they lose because of these bid-ask spreads — every time, they have to pay the round-trip trading costs,” said Pavlova in an interview.Bryzgalova, an assistant professor at LBS, says among the types of contracts and stocks retail traders prefer, “these are all transactions that have lottery-like features.”
To be sure, the researchers say they had to work in certain premises since they did not have access to account-level data from a brokerage like Robinhood, meaning a rundown of when a trader moved into and out of certain positions. Therefore, they had to make assumptions about the holding period, as well as prices.They found that stocks mentioned on WallStreetBets tended to be highly favoured by retail investors.
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