
![]() | Read in Browser | |||||||||
![]() | ||||||||||
|
• Around 39M options contracts have traded daily on average this year, rising 35% from 2020 and the highest level ever - Options Clearing Corp.
• Retail investors represent more than 25% of total options trading activity due to access via commission-free brokers - Alphacution Research Conservatory.
• The average daily notional value (volume multiplied by spot price) of traded single-stock options climbed to more than $450B in 2021, compared with $405B for stocks - Cboe Global Markets.
What's fueling the surge? Hot trading apps and social media hype has seen retail crowd pour into the market since competition between brokerages eliminated trading fees in 2019. While stocks were the initial focus, much of the attention today centers around options, which allow traders to notch big returns (or losses) without having to actually purchase shares. Besides the leverage, many investors are also using derivatives as a hedge, such as protecting their portfolios against sentiment changes - a good example of this was the recent Fed meeting.
It's also been a big win for the brokerages, which are scoring some big bucks off the options rage. Popular brokerage Robinhood (NASDAQ:HOOD) even generated $164M from options trading in the third quarter, more than triple its transaction-based revenue from traditional stock trading. Activity has also been prominent in the so-called meme stocks, which initially created massive short squeezes in names like GameStop (GME) and AMC (AMC), but eventually created a swarm trading strategy of its own.
Some caution: The increased engagement is attracting the attention of regulators like the Financial Industry Regulatory Authority. Wall Street's self-regulatory arm is considering whether changes to the options rules may be warranted, including regulations around options account approvals, supervision and margin requirements. FINRA's request for comment will be published in the coming weeks to solicit insight from exchanges and brokers about options trading and the risks involved. (13 comments)
Backdrop: The moratorium began in March 2020, when former President Trump signed the CARES Act into law, pausing payments through September 2020 and eliminating interest rates for the about 42M borrowers. Trump later took executive action to extend the deferral period through January 2021, while Biden signed another order when he came into office, continuing it through Sept. 30, and then eventually Jan. 31, 2022. At the time, the Education Department said that it would be the "final extension," while a "definitive end date" would reduce the risk of delinquency and defaults once the payments restart.
Meanwhile, Congressional Democrats like Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren have been pressuring Biden to take executive action to wipe out up to $50K in student loan debt for all borrowers. While he has gone on record saying he doesn't believe a president has the authority to cancel student debt unilaterally, Biden would support Congress passing a bill to cancel $10K in debt for each borrower. About 62% of voters support some form of student loan forgiveness, according to a recent poll by Morning Consult, but ideas differ about how much debt should be forgiven and for whom.
Go deeper: The Federal Reserve estimated that Americans owed $1.75T in student loans in the third quarter of 2021, with the average debt around $40,000 per borrower. Related student loan stocks include Sallie Mae (NASDAQ:SLM), Navient (NASDAQ:NAVI) and Nelnet (NYSE:NNI). (28 comments)
U.S. Indices
Dow +1.7% to 35,951. S&P 500 +2.3% to 4,726. Nasdaq +3.2% to 15,653. Russell 2000 +3.3% to 2,245. CBOE Volatility Index -16.7% to 17.96.
S&P 500 Sectors
Consumer Staples +0.6%. Utilities +0.2%. Financials +1.1%. Telecom +2.5%. Healthcare +1.4%. Industrials +1.8%. Information Technology +3.3%. Materials +1.2%. Energy +2.4%. Consumer Discretionary +3.8%.
World Indices
London +1.4% to 7,372. France +2.3% to 7,087. Germany +1.5% to 15,756. Japan +0.8% to 28,783. China -0.4% to 3,618. Hong Kong +0.1% to 23,224. India +0.2% to 57,124.
Commodities and Bonds
Crude Oil WTI +4.% to $73.72/bbl. Gold +0.3% to $1,810.1/oz. Natural Gas -1.7% to 3.626. Ten-Year Treasury Yield -1.% to 130.5.
Forex and Cryptos
EUR/USD +0.75%. USD/JPY +0.6%. GBP/USD +1.18%. Bitcoin +11.1%. Litecoin +13.1%. Ethereum +5.7%. XRP +19.2%.
Top Stock Gainers
Society Pass Incorporated (NASDAQ:SOPA) +354%. Biofrontera Inc (NASDAQ:BFRI) +91%. Bluerock Residential Growth Rei (NYSE:BRG) +85%. Biondvax Pharma ADR (NASDAQ:BVXV) +81%. Galera Therapeutics Inc (NASDAQ:GRTX) +69%.
Top Stock Losers
Allakos Inc (NASDAQ:ALLK) -87%. Adagio Therapeutics Inc (NASDAQ:ADGI) -39%. Aldeyra Therapeu (NASDAQ:ALDX) -38%. Zhangmen Education Inc ADR (NYSE:ZME) -36%. Summit Therapeu ADR (NASDAQ:SMMT) -36%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.


Want More Ideas?
Our best ideas → Stock Ideas
ETF's Investing Ideas → ETF Ideas
Dividend stocks ideas → Dividend Ideas
This email was sent to you because you signed up to receive Wall Street Breakfast.
If you do not want to receive Wall Street Breakfast emails, click here to unsubscribe.
Sent by Seeking Alpha, 52 Vanderbilt Avenue, 13th floor, New York, NY 10017
EmoticonEmoticon