There’s more ‘adoption of options’ among retail traders: Schwab

00:00 Josh

Retail investors stepping back into the market, new data from Charles Schwab showing clients piled into AI leaders like Nvidia and Micron. Joined me now got Joe Mazola, head trading and derivatives strategist at Charles Schwab. Joe, it is good to see you. So, sounds like your latest stax report there, Joe. It did show investors, you know, stepping back into the market, it looks like in May, but maybe uh maybe a bit cautiously. What what’s the headline, Joe? What what are you seeing?

00:20 Joe Mazola

Another thing that really kind of stood out is just the more adoption of options uh in terms of kind of how investors are are choosing uh to get into the market. So, we see a decent amount of put selling. We did see a decent amount of put selling on a lot of the a lot of the high-flying um memory chip names, whether it’s Micron, Sandisk. Uh you know, those those were some of the ones that that that saw a lot of put selling. Um we did see some upside call buying, uh but I think for the most part, investors instead of kind of chasing the rally and and having um all of their allocation to stock, they’re finding ways to kind of creatively adjust their portfolios so they can participate in the upside uh and maybe optimize those portfolio allocations a little bit more effectively.

01:00 Josh

One thing that also jumps out here, uh Joe, geopolitical risk, now the number one concern, it looks like for a lot of investors, even above inflation. What what do you make that? How much do you think that that Middle East situation is impacting trading, Joe?

01:15 Joe Mazola

When the tweets come out, I I think that moves markets. Um, you know, I think to a certain extent uh that, you know, that that had a a heavy impact on on some of the selling that you saw today. And I think maybe it’s just because this market is seems to be kind of riding around multiple inflection points. Like one of the one of the things I was calling out yesterday in the area I was I’ve been watching quite a bit is the um 7450 level on the S&P 500. It’s the 21-day uh exponential moving average. It’s a it’s an area we kind of oscillated around yesterday before pulling back. Got back up there today, hit it. Uh it looked like we were trading above it, then the tweet comes out, then we pull all the way down to 7200 and change. Um so, you know, it’s it’s a it’s a market that underneath the underneath the surface, the rotation I think is is actually good. Uh but at the same time when you have 33, 34% of the S&P 500 tied to tech, tech weakness can pull the whole index down. So, uh you know, a couple of other things I’m looking at, Josh, right now uh in terms of maybe volatility, it just it continues with this dispersion, right? Where the index level, it it’s it’s it’s held up fairly well, but you see these implied volatilities just skyrocketing within the single stocks and I think that that’s something that um you know, you can attribute uh partially to to the retail investors. We’ve seen a lot of kind of upside call buying. Um so, you know, what’s what’s interesting about that is if that does start to unravel, right? It becomes a little bit of a cascading effect uh as as um retail investors and and institutional investors to be fair, you know, start rotating into different sectors.