# Analysis-U.S. retail traders pile back into options as meme-stock mania flares
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-18
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Speculative Options Trading Rises Alongside Meme Stock Rally
Meta Description: Speculative options trading is increasing alongside a rally in meme stocks, driven by individual investors seeking outsized gains. Learn more here.
URL: https://financedigest.com/analysis-u-s-retail-traders-pile-back-into-options-as-meme-stock-mania-flareshtml

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) – Speculative options trading is on the rise again among individual investors alongside a rally in so-called meme stocks, reviving a trend that swept Wall Street last year but faded as markets turned volatile in 2022.

Trading in single stock options – a popular vehicle for retail investors looking to place leveraged bets in hopes of outsized gains – has shot higher in recent weeks, with 10-day average daily trading volume at a more-than six-month high of nearly 25 million contracts, Trade Alert data showed.

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/08/Single-stock-options.jpg)

The rise in options trading comes amid wild rallies in the [shares of companies popular with retail investors](https://www.financedigest.com/asian-shares-muted-as-investors-fret-over-china-reopening.html "Asian shares muted as investors fret over China reopening"), led by Bed, Bath & Beyond, whose stock is up about 360% this month. More seasoned meme-stock names such as GameStop and AMC Entertainment have surged as well, rising 19% and 47% respectively month-to-date. The S&P 500 is up 3.5% so far in August and has rallied nearly 17% from its June lows.

It’s clear that [individual investors are re-engaged in options trading,”](https://www.financedigest.com/how-to-trade-forex-and-succeed-as-an-individual.html "How to Trade Forex and Succeed as an Individual") said Steve Sosnick, chief strategist at Interactive Brokers.

Certainly a disproportionate amount of the growth is in highly speculative names, [meme stocks](https://www.financedigest.com/cineworld-eyes-wall-st-money-after-rival-amc-becomes-meme-stock.html "Cineworld eyes Wall St money after rival AMC becomes meme stock") and the like.

Shares of many smaller or less [profitable companies were hit hard in the first half of the year](https://www.financedigest.com/crop-merchant-louis-dreyfus-gets-profit-boost-in-volatile-year.html "Crop merchant Louis Dreyfus gets profit boost in volatile year"), when worries over surging inflation and a hawkish Federal Reserve dried up risk appetite and dealt the S&P 500 its worst first half loss since 1970.

The recent pickup in options trading is one sign that [risk appetite among retail investors](https://www.financedigest.com/institutional-investors-back-shell-board-lawsuit-over-climate-risk.html "Institutional investors back Shell board lawsuit over climate risk") may be returning, although volumes are still down some 24% from a peak hit last November.

On Wednesday, Bed Bath & Beyond was the second-most [actively traded single-stock name with 1.4 million options contracts](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") changing hands, topping market behemoths such as Tesla and Amazon.com.

The focus on Bed Bath & Beyond grew after a regulatory filing showed on Aug. 16 that activist investor and GameStop Chairman Ryan Cohen took a large bullish options [positions in the retailer’s](https://www.financedigest.com/uk-retailers-turn-positive-on-sales-hopes-after-bleak-winter.html "UK retailers turn positive on sales hopes after bleak winter") shares.

Bed Bath & Beyond [shares closed](https://www.financedigest.com/power-generation-sector-to-remain-largest-end-user-of-industrial-engines-persistence-market-research.html "Double Acting Hydraulic Cylinders to Hold Close to 50% Market Share: Persistence Market Research") up nearly 12% on Wednesday but fell sharply in after-hours trading, after a late filing showed RC Ventures, owned by Cohen, filed a notice with the U.S. SEC for the proposed sale of 9.45 million shares, [including options](https://www.financedigest.com/stanchart-weighing-options-including-sale-of-aircraft-lessor-unit.html "StanChart weighing options, including sale, of aircraft lessor unit").

Other stocks popular with retail [traders have also drawn increased interest in recent weeks](https://www.financedigest.com/dollar-near-one-week-high-as-traders-prepare-for-powell-payrolls-tests.html "Dollar near one-week high as traders prepare for Powell, payrolls tests"), though not to the same extent. AMC daily options volume, for instance, stands at about 64,000 contracts month-to-date, up [60% from the average for the rest of the year](https://www.financedigest.com/nearly-60-of-people-are-worried-about-their-data-being-used-by-mobile-apps-but-continue-to-download-as-many-as-100-apps-over-the-course-of-a-year.html "Nearly 60% of people are worried about their data being used by mobile apps, but continue to download as many as 100 apps over the course of a year").

The rise in retail options trading has been accompanied by increased engagement in social media platforms where meme stocks are discussed, according to data from VandaTrack, another [sign that individual investors are growing](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up") bolder.

Still, many [market watchers have been skeptical of the rallies](https://www.financedigest.com/jittery-markets-attempt-risk-on-rally-while-waiting-for-powell.html "Jittery markets attempt risk-on rally while waiting for Powell"), noting that past rebounds in meme stocks have fizzled, particularly a run in the first half of the year that was followed by new lows in broader markets.

“It’s the dog days of summer and we have had a little bit of easing of volatility,” said Garrett DeSimone, head quant at OptionMetrics. I wouldn’t [say it is a total change](https://www.financedigest.com/pelosi-praises-taiwan-says-asian-trip-wasnt-to-change-status-quo.html "Pelosi praises Taiwan, says Asian trip wasn’t to change status quo") in risk aversion.

Dan Pipitone, chief executive of retail brokerage TradeZero, noted that a surge in call [buying is often viewed as a contrarian signal that points to a near-term top](https://www.financedigest.com/4-for-the-price-of-1-what-you-can-buy-in-the-uks-top-northern-cities-for-the-price-of-a-london-pad.html "4 for the price of 1: What you can buy in the UK’s top northern cities for the price of a London pad") in markets.

Much depends on whether the bounce that has taken broader [markets higher](https://www.financedigest.com/dollar-edges-higher-as-market-awaits-clues-from-u-s-fed.html "Dollar edges higher as market awaits clues from U.S. Fed") starts to fade, said Sosnick, of Interactive Brokers.

If we start to go down in a meaningful way, particularly if we re-test the lows, that would [mean the greed would revert to fear,”](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") he said.

(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Richard Pullin)


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