luxmain writes on Options trading going crazy.

It occured to me recently that 'fake TA / MI signals', (relative to history pre-2022), may have been generated currently by record call options activity.

For example, what looks like 'lots of people buying in, broadly across the market' in the data, may actually be a small number of traders using ridiculous high levels of gearing to bet on the index with calls. With social networks and youtube/reddit crowd leaders having the effect of amplifying particular trades, too.

This matters, because market activity driven by delta-hedging of short-term, highly geared call options should get reversed if the calls are sold back to the MM or expire worthless, rather than the options being exercised/held as stock afterwards.

I have seen a LOT of young adults win and lose a LOT of money in recent months using options to gamble.

There are also social dynamics in social media to ensure people are actually placing the trades they claim to be placing: 'proof or ban!'.

I am seeing a LOT of gambling addiction / problem gambling behaviour nowadays where young adults are using options.

lux