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What Kind of Index Option Traders and Trades Are Profitable?

Steve LeCompte | | Posted in: Equity Options, Individual Investing, Investing Expertise

Guide Options and Leveraged ETFs Other option research

Key Insight

Domestic retail accounts had a median annualized Sharpe ratio of -1.11 versus +1.11 for domestic institutional accounts (KOSPI 200 options/futures; Jan 2010–Jun 2014; 153,835 retail, 5,904 institutional accounts; before broker fees; descriptive; not a trading test).

Overall, how do retail option traders perform compared to institutional counterparts, and what accounts for any performance difference? In their June 2021 paper entitled "Who Profits From Trading Options?", Jianfeng Hu, Antonia Kirilova, Seongkyu Park and Doojin Ryu use account-level transaction data to examine trading styles and profitability by investor category for KOSPI 200 index options and futures. There are no restrictions in Korean derivatives markets on retail investor participation, and retail participation is high. Using anonymized account-level (153,835 domestic retail, 5,904 domestic institutional, 667 foreign institutional and 604 foreign retail) data for all KOSPI 200 index options and futures trades during January 2010 through June 2014, they find that:

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Options and Leveraged ETFs guide

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