A surge in retail trading through exchange-traded and structured products is reshaping the options market — creating both liquidity and opportunities for professional traders, according to a report by Bloomberg citing speakers at the Bloomberg Intelligence Volatility Forum in New York.
Average daily retail order volume rose 18.5% to 32 million over the past year, driving deeper markets in short-dated options. “It creates huge liquidity and opportunity for us,” said Benn Eifert, co-CIO of QVR Advisors, who noted that hedge funds can now interact directly with retail flow rather than trading through banks.
Retail investors are now responsible for 50–60% of zero-day options volume, according to Cboe’s Mandy Xu, who added that retail strategies have become increasingly systematic and sophisticated — often resembling institutional approaches.
ETF-based structured products, meanwhile, such as covered call and buffer ETFs, are dampening volatility by expanding the supply of index options. Bloomberg Intelligence strategist Tanvir Sandhu said call-writing ETFs on the Nasdaq 100 have accelerated, contributing to persistently low index volatility since April.
However, panelists warned that some popular call-overwriting and collar strategies remain poorly understood and can underperform in stressed markets.
Eifert added that traditional 60/40 portfolios still outperform most structured overlay strategies “consistently over all periods of time.”
