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Stats › Intraday and market microstructure › Retail option results

Retail investors who traded only derivatives lost 3.5% a month net

Gross raw t = -2.10: -1.49%-1.49%Gross rawt = -2.10Gross alpha t = -2.57: -1.36%-1.36%Gross alphat = -2.57Net raw t = -4.92: -3.51%-3.51%Net rawt = -4.92Net alpha t = -6.63: -3.45%-3.45%Net alphat = -6.63

Monthly underperformance of investors who traded only derivatives in a given month, from Fama-MacBeth cross-sectional regressions on 68,146 accounts at a Dutch online discount broker, January 2000 to March 2006. Alphas are measured against an option-aware factor model. The gap between gross and net is about two percentage points a month.

Dutch retail investors who traded only derivatives underperformed by 1.49% a month gross and 3.51% net, with t statistics of 2.10 and 4.92. The effect is concentrated in 2003 to 2006; during the dot com bust the same group's underperformance is not significant.

-1.49%Monthly underperformance, derivatives-only traders, gross
-3.51%The same net of costs, t = -4.92
-5.55%The same over 2003 to 2006, net of costs
-1.29%The same over 2000 to 2002, not significant

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