A Thrill-Seeking Trade Amps Up Heading Into 2025
Stock options are soaring with everyday investors wagering on market whipsaws
The hottest market for daredevil traders is hitting a fever pitch.
About 48 million options contracts have changed hands daily on average this year, on pace for a record in data going back to 1973, according to the Options Clearing Corp., or OCC. That is up 9% from last year and would mark the fifth straight year of fresh all-time highs.
Options were traditionally used by professional investors to protect portfolios from risk. Now, they have become wildly popular among rookie traders seeking to amplify their bets, especially on extremely volatile stocks.
The contracts allow traders to make directional bets on stocks by offering the right to buy or sell shares at a specified price, by a set date. They can expire in months, days or even hours and let traders score eye-popping payouts—or incur bruising losses.
“It’s really the phenomenon of the retail trader that continues to just drive this growth,” said Catherine Clay, head of global derivatives at Cboe Global Markets.
Many analysts expect such risky trades to keep proliferating. The Federal Reserve began cutting interest rates this year, bringing them down from their highest levels in more than two decades. Donald Trump’s re-election has already helped spur a rally in speculative assets like bitcoin and is widely expected to boost markets.
Everyday investors are making all sorts of other wagers. Sports gambling is growing on platforms such as DraftKings and FanDuel. Prediction markets let people wager on everything from who will win a presidential election to whether Taylor Swift will stay the top artist on Spotify.
Analysts say that activity from individual options traders can be a leading indicator. If they pile into bets on a stock rising, for example, the shares are more likely to jump the following week. Amateur traders made up 29% of U.S. options activity as of September, up from 23% at the start of 2020, according to Bloomberg Intelligence.
Both novices and Wall Street traders are charging into options that expire the same day. These zero-day-to-expiry options, or “0dte” trades, make up more than half of options activity tied to the S&P 500 index, up from 17% at the start of 2020, according to market researcher SpotGamma.
Industry executives are considering ways to allow zero-day bets on individual stocks, The Wall Street Journal has reported.
Single-stock options bets rose 15% this year, according to Cboe data as of Thursday. That outpaced growth of 8% and 2.9% for index- and exchange-traded fund products, respectively.
Nvidia this year overtook Tesla as the most popular single-stock options play. Traders have been eager to take advantage of the often volatile swings in Nvidia shares around the chip maker’s quarterly earnings.
Viviane Mason, a 53-year-old sales professional in San Diego, said she made about $54,000 scooping up call options ahead of Nvidia’s earnings results in May and selling them after the company beat expectations. Calls give traders the right to buy a stock at a set price.
Mason recently lost $29,000 buying Meta Platforms call options after noticing huge hedge fund call orders tied to the company. The stock didn’t take off until a week after her own calls expired, leaving her investment worthless.
“It’s not for the faint of the heart,” she said. “Not everyone has the guts of losing $20,000 one day and starting all over the next.”
Crypto-related options activity exploded after the election and the debut of options on spot bitcoin exchange-traded funds. Strategists expect that boom to continue with Trump’s embrace of the crypto industry.
Options activity has escalated around MicroStrategy, a bitcoin-buying company whose shares have skyrocketed since Election Day.
Some of the most popular options trades tied to MicroStrategy in recent days have been bets the stock will tumble to $155 or surge to $1,080 a share. The stock is up more than 400% this year and closed at $330 on Friday.
Analysts say this year’s flurry of options trading, much of which has been bullish, and the S&P 500’s 25% climb raise questions about whether markets could be headed for a downturn.
“If there is a market correction, I think it could be pretty violent. That could really still keep options volumes very elevated,” said Brent Kochuba, founder of SpotGamma.