As 2025 Approaches, a Thrill Seeking Trade Ramps Up

The options market, long a playground for professional investors managing portfolio risks, is experiencing unprecedented growth fueled by a surge of retail traders chasing high-stakes bets. According to the Options Clearing Corp. (OCC), an average of 48 million options contracts have been traded daily this year, a record-breaking pace in data dating back to 1973. This marks a 9% increase from last year and the fifth consecutive year of record-setting activity.

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Traditionally used for hedging risks, options have now become a favorite tool for amateur investors seeking to capitalize on highly volatile stocks. These contracts grant traders the right to buy or sell shares at a predetermined price by a specific date, with expiration periods ranging from months to mere hours. This flexibility enables significant gains but also exposes traders to substantial losses

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“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.

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The Federal Reserve’s interest rate cuts this year, lowering rates from their highest levels in over two decades, have set the stage for speculative trading to flourish. Former President Donald Trump’s re-election has also contributed to a rally in riskier assets such as bitcoin, which analysts believe will further fuel market activity.

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Beyond the stock market, individual investors are embracing various forms of speculation, from sports gambling on platforms like DraftKings and FanDuel to prediction markets wagering on political outcomes or entertainment trends, such as Taylor Swift’s dominance on Spotify.

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Analysts suggest that activity from retail options traders often serves as a precursor to stock movements. When these traders flock to bullish bets on a particular stock, the shares are more likely to surge in the following week. As of September, amateur investors accounted for 29% of U.S. options activity, up from 23% at the start of 2020, according to Bloomberg Intelligence.

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A particularly risky trend has emerged with zero-day-to-expiry (0DTE) options, which expire on the same day they are purchased. These contracts now constitute over half of the options activity tied to the S&P 500, a sharp increase from just 17% in early 2020, according to SpotGamma. Industry leaders are reportedly exploring the possibility of extending zero-day options to individual stocks, broadening their appeal.

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This year, single-stock options trades have surged by 15%, surpassing the growth rates of index- and exchange-traded fund (ETF) options, which rose by 8% and 2.9%, respectively, according to Cboe data. Nvidia has emerged as the most popular stock for options trading, overtaking Tesla. Traders have been particularly drawn to Nvidia’s share price volatility around its quarterly earnings reports.

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Retail traders like Viviane Mason exemplify both the appeal and risks of options trading. Mason, a 53-year-old sales professional in San Diego, reportedly earned $54,000 by purchasing call options on Nvidia ahead of its strong earnings report in May. Call options give traders the right to buy shares at a specific price, enabling substantial profits when the stock rises.

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However, Mason also faced significant losses, including a $29,000 hit on Meta Platforms call options. Her investment became worthless when the stock’s rally occurred a week after her options had expired. “It’s not for the faint of heart,” Mason remarked. “Not everyone has the guts of losing $20,000 one day and starting all over the next.”

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Options activity has surged in crypto-related trades, particularly following the election and the introduction of options tied to spot bitcoin exchange-traded funds. Analysts expect this trend to persist, especially with Donald Trump’s vocal support for the cryptocurrency industry. Companies like MicroStrategy, known for significant bitcoin holdings, have seen their shares skyrocket, fueling speculative options trading. In recent days, popular trades have included wagers that MicroStrategy’s stock could either plummet to $155 or soar to $1,080 per share. The stock, currently up over 400% this year, closed at $330 on Friday.

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The booming options market has paralleled the S&P 500’s 25% rally this year, with much of the trading activity skewing bullish. However, some analysts caution that this exuberance could signal potential market turbulence. Brent Kochuba, founder of SpotGamma, warned, “If there is a market correction, I think it could be pretty violent. That could really still keep options volumes very elevated.”

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As retail traders and Wall Street professionals alike continue to embrace options trading, the market shows no signs of slowing down. While the potential for outsized gains remains a key attraction, the associated risks underscore the high-stakes nature of this increasingly popular financial tool.

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