Who are you guys?
That’s what the Option Industry Council (OIC) aimed to
find out in its “Profile of the Options Investor” study
released in April. The survey, conducted every five years by
the organization, covered a wide variety of aspects regarding
options traders vs. non-options traders.
The survey of 569 investors in options and stocks showed
that options traders are more likely to have an annual
income of more than $100,000 and hold more liquid assets
than non-options traders.
Not surprisingly, options traders also were more active
and held a more diverse portfolio than non-options traders.
The survey found that options traders are four times more
likely than their counterparts to make more than 50 trades
in a year. Options investors also are much more diversified
and more likely to own over-the-counter stocks, exchange
traded funds, gold, and futures, the study said.
The survey also indicated a shift in the reasons people do
not trade options. The 2005 study said “lack of knowledge”
about options was the top reason, while prior surveys
showed that traders avoided options because they thought
they were “too risky.” Options industry professionals say
this is an important shift because it indicates options trading
is gaining acceptance as an investment tool.
“I’m gratified to see lack of education is the reason people
are not investing in options, rather than saying it’s a bad
product,” says Hank Nothnegel, senior vice president at
Wachovia Securities.
Nothnagel also believes options are on their way to
becoming a mainstream product.
“I don’t think we’re very far away from being widely
accepted,” Nothnagel says.
Other retail options firm executives were not so certain,
however. Joe Sellitto, director of derivatives products at
E*Trade, says options trading at E*Trade has grown steadily.
The company has also advertised its options-trading
capabilities for the first time. Still, Sellitto says there is a
long way to go for the product.
“I don’t think it’s mainstream at all because there are so
many investors who don’t choose options and [aren’t] educated
about [them],” Sellitto says.
Retail executives say there is a tremendous amount of
information about options trading, especially via the education
efforts of the OIC. But some retail options brokers say
at the firm level, options are not considered a high priority
in terms of marketing and resources. Firms continue to promote
stock trading, ETFs, and other products, but budgets
are limited for options promotion.
The study also found the Internet is the primary source
for trading and information. According to the survey, 83
percent of all options traders trade online while only 63 percent
of non-options investors do.