Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/327125 
Year of Publication: 
2025
Series/Report no.: 
CFR Working Paper No. 25-09
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
We analyze a market-wide panel dataset on retail options trading from India, a market with an 80% share in option contracts traded worldwide. Retail traders both concentrated in and dominate index options trading. They exhibit short-term speculative behavior with significant day trading, short- duration directional bets especially as options converge to 0DTE and make significant losses. Three natural experiments indicate that financial constraints and lottery-like preferences likely shape investor behavior. An exogenous increase in the supply of short-maturity options induces trading. Lot-size increases and delivery margins trying to curb speculation are offset by shifts to small ticket-size, riskier options. While financial market participation increases welfare in canonical household finance models, it can also entrench speculative behavior that is difficult to undo.
Subjects: 
Options
Retail Options Trading
Speculation
Skewness
Lotteries
Gambling
Addiction
Financial Inclusion
Stock Market Participation
JEL: 
D14
D18
G14
G15
G18
G50
G53
O16
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.