Schwab Survey Says Options are Not Just for Trading Anymore
While options volume has grown at a fast pace in the last few years, an increasing percentage of the trading and investing public is familiar with options and how they function, it’s still difficult to pinpoint the typical options trader.
Brokerage Charles Schwab surveyed almost 800 of its options clients who had made at least five trades in the past 12 months.
“Most of our clients are trading a lot more than that,”
says Randy Frederick, director of derivatives at Charles
Schwab. “But we wanted to include those who don’t use
options as their number one instrument, and we wanted to
have enough respondents to make the results valid.”
Many of the results were not surprising. The average
responder was overwhelmingly (94 percent) male, 57 years
old, and had been trading for 11 years. Just more than half
considered themselves experienced or highly experienced,
and only nine percent said they were beginners.
Eighty-seven percent considered themselves self-directed,
with 53 percent working full- or part-time and 42 percent
retired or semi-retired. Perhaps the most surprising responses came when traders were asked about their attitude toward options
trading. While 69 percent said options trading was a great
way to generate income (and 61 percent described themselves
as risk-takers), 56 percent said it was part of their
retirement strategy - eight percent more than those whose
options-trading funds were separate from their core holdings.
“That’s the most interesting result,” Frederick says. “And
I think it’s wonderful, because I try to educate people about
the use of options as a retirement instrument, and I’ve had
to overcome a bit of a bad reputation that options have had.
This tells me we’re making progress. “I suspect that number has been creeping up the last few years, and I think it will continue to go higher,” he adds.
Less than a third said they were trying to outsmart the
market by trading options, although 40 percent said there’s
been more upside in options than in stocks or bonds, and 52
percent said their options trading increased when the market
was more volatile. Still, at 68 percent, short-term gains or speculation was the top reason the respondents traded options. Just less than two-thirds trade for income generation, while 42 percent said they hedge or protect a portfolio, 27 percent said
they enjoy the challenge, and 20 percent trade options for
long-term gains or investing.
Buying calls was the most common strategy implemented
by the Schwab traders (73 percent), while selling covered
calls (65 percent) and buying puts (57 percent) were next.
Keep in mind that these figures come from Schwabs own clientele. The numbers could certainly reflect a different result if other firms were considered along with filtering the number of trades per year to a much higher number instead of a mere 5 Option Trades per Year.
Frank Kneipher
FKPRINTS1@YAHOO.COM
