Trading behavior of retail investors in derivatives markets: Evidence from Mini options

Yubin Li, Chen Zhao and Zhaodong Zhong

Journal of Banking & Finance, 2021, vol. 133, issue C

Abstract: Mini options are specially catered to retail investors with limited capital for trading options on extremely high-priced securities. The coexistence of both Mini and standard options for the same underlying security provides us a novel setting to investigate whether and how small retail investors use derivatives contracts differently compared to their counterparts. First, we find that the Mini option investors are more subject to constraints of limited attention. Specifically, Mini option investors trade more intensively near market opens, and their trading activities are more heavily influenced by attention-grabbing events and attention-distracting events. Second, we document that Mini option investors’ trading is more likely to be driven by market sentiment than standard option investors. Third, the trading performance of Mini option investors is also worse than that of standard option investors, with less positive intraday returns and more negative overnight returns.

Keywords: Options; Retail investors; Trading behavior; Limited attention; Sentiment (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 G41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:133:y:2021:i:c:s0378426621002090

DOI: 10.1016/j.jbankfin.2021.106250

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