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The Changing Face of “Mom and Pop” Traders

Catherine Clay Catherine Clay - Livevol CEO

By Catherine Clay, CEO of Livevol

When Andy Nybo talks, I pay close attention. I’m sure I’m not alone because Andy, head of derivatives research at the TABB Group, delivers some great research. Some of his recent research concerns the rise of the individual retail trader, a subject covered in a recent Wall Street Journal article, “Mom and Pop Flock to Options Market.”

Obviously, participation is the lifeblood of the options market. Data showing increased retail option trading is music to the ears.

Andy’s research also dovetails into what we are seeing at Livevol. “Mom and Pop” traders are opening accounts at a brisk clip. But what is truly eye-opening is the growing sophistication of these traders.

No longer content with simple covered call or similar strategies, many of these clients request substantial amounts of historical options data for their research or custom market scanning. They also ask for custom back testing to get a better idea of the effectiveness of some trading strategies.

From our vantage point, the demographic of the options trader is also changing. Once pigeonholed as 50- to 65-year-old affluent white males, options traders now increasingly include people from different genders, races, ages and income levels. This is not your Mom’s “Mom and Pop” trader.

Perhaps we should give a nod to the options educators for the continued growth in the options space. Without the dramatic improvements in options education, I doubt we would see so many new people entering the options market, nor would those people be nearly as sophisticated as they are.

Special thanks to the Options Industry Council for all its great work. Kudos also to some of my favorite educators: Dan Nathan (Risk Reversal), Mark Sebastian (Option Pit) and Dan Passarelli (Market Taker). And last, but certainly not least, a special nod to the good folks here at Lothian who keep us informed about what’s movin’ and shakin’ in the options world.

Hats off!

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Rudolph is managing editor of John Lothian News (JLN).