Odd Lots Benn Eifert Explains How Retail Trading Is Rocking Markets like Never Before
Feb 3, 2021
Benn Eifert, CIO of QVR Advisors and an expert in volatility and derivatives, dives into the retail trading boom, highlighting its profound influence on markets. He unpacks the GameStop saga and the mechanics behind short squeezes, revealing the surprising sophistication of retail traders. Eifert discusses how social media, especially platforms like Reddit, has reshaped trading behavior. He also addresses regulatory challenges faced by brokerages like Robinhood and explores the future landscape of retail trading, including the rise of copy trading platforms.
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Retail Options Impact
- Retail option buying creates leverage, translating smaller investments into larger market impacts.
- Market makers hedge these options by buying stock, amplifying retail's influence.
Gamma Squeeze Mechanics
- Call options accelerate stock price increases as they near their strike price.
- Dealers buy more stock to hedge, creating a gamma squeeze.
Targeted Options Buying
- Some WallStreetBets users targeted specific option contracts to maximize impact on GameStop's stock price.
- This sophisticated behavior, typically associated with hedge funds, fueled the squeeze.