The Retail Options Markets: It Doesn't Get Any Better Than This

The retail options industry has never been healthier. Retail participation continues to expand, brokers are seeing strong revenue growth and the industry continues to see growing demand from investors seeking to become more intimately involved with options trading strategies. The retail options investor is evolving.

Much has to do with the industry’s relentless focus on education that is contributing to an increasingly sophisticated user base. Investors are getting smarter about how they use options, with risk exposure a growing focus. The growing level of sophistication has resulted in retail options traders expanding beyond simple call writing strategies. There is also a small but fast-growing user base expanding into complex volatility strategies that were once the sole domain of specialized hedge funds and prop trading desks.

The growth also comes from advancements in broker technology platforms, which are providing powerful analytical and execution capabilities to the retail trader. Retail brokers are investing significant resources to build out and revamp trading front-ends to support demands from options trading clients. They are also providing comprehensive analytical capabilities that rival and frequently surpass functionality imbedded in platforms on institutional trading desks. Providing investors with institutional-class trading capabilities is one way to cater to the needs of retail investors, but brokers are also lowering commissions and providing white glove service to meet the needs of the more affluent trading accounts.

Retail investors will provide an essential source of demand in US listed options markets, especially as performance of US equity markets continues to improve in 2014. As retail demand for equity exposure expands, so will trading in options as many of the options strategies used by retail investors are directly related to their underlying equity investment strategies. Retail options investors are enjoying the best of all worlds. Unprecedented access, falling commissions and better prices: it just doesn’t get any better than this.