Retail Options Trading Market
March 4, 2025
One of my recent projects with Spring Creek Web Design has been building an options trading log. You can check it out over at IotaTradingLog.com soon.
Almost everyone has a friend, family member, or acquaintance who got sucked into financial markets during 2020-21, and the explosion in retail participation is evident in the data. See Chart 1.
Unsurprisingly, helicopter money and lots of time led to people placing risky bets. The marketing of options via simplified trading platforms such as Robinhood towards less experienced traders during this time undoubtedly aided the increased popularity. Social media virality, financial nihilism and a loss in belief of traditional ‘work to retire’ paths most likely had an impact as well, though it is unclear how much.
Google Trends data (Chart 2) clearly shows the explosion in options trading interest at the beginning of the pandemic. Search interest for options trading post-COVID has settled at a higher level than pre-COVID.
The spike in retail share of the options market during the pandemic is clear, but the chart does not prove total volume increased. Chart 3 provides a more comprehensive breakdown of the US options market and was compiled by the CBOE.
Both market makers and retail have notably increased their volume of options trading since 2020, while other groups have seen little change to volume over the same time period.
When comparing Charts 1 & 3, it is notable that retail option volume has increased since the initial jump in early 2020, even as the retail share of the total market has slowly decreased. In other words, even as the retail options market grows post-COVID, market makers are increasing their share of the market at a faster pace.
Future Trend
There is no doubt some combination of the pandemic, lockdowns, targeted advertising, and helicopter money led to a jump in retail options trading in 2020-21. The future trend in retail options trading will depend on user retention on apps like Robinhood, popularity of alternative options (crypto, sports betting, etc.), and government policy.
It seems clear that more helicopter money via a “DOGE dividend”, Universal Basic Income, or some similar government policy would see a portion of the stimulus channeled into (often YOLO) options trading by retail.
Market research on this topic leaves plenty to be desired. The most common style of ‘reporting’ is short and shallow articles on the rise of options trading with little emphasis on data. This is for good reason – collecting data from numerous platforms is costly, difficult, and the effort almost certainly encourages putting the findings behind a paywall. Some of the best studies, like this one from the NFA use small sample sizes from single sources, in the case a public trade log. This sample almost certainly captures a more sophisticated group of retail traders, assuming your average retail options trader using a trading log is more experienced than your average retail trader.
Financial derivatives are no longer the exclusive game they used to be – anyone can get approved to trade options thanks to low friction ‘free’ trading apps like Robinhood. The initial rush during the pandemic is over, and the question now is what drives the next wave of participants into (or out of) the market?
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