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Options Being Used More for Speculation Than Traditional Hedging

  • Call volumes increasing significantly while puts remain steady
  • Call skew shows positioning for rallies, Susquehanna says

Patterns in options trading are confirming the suspicion that retail investors are largely behind the shift in how options are being used, which has partially helped the stock market recover from its Covid-19 selloff in March.

While traditionally a tool that fund managers have used to hedge their portfolios, it now appears options are being used more for speculative bets on the price of the underlying shares by retail investors. A surge in trading of small lots of options this year has been linked to the growing number of individuals who got involved in the market amid the Covid-19 lockdowns.