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A. Naranjo, M. Nimalendran, and Y. Wu: “Betting on Elusive Returns: Retail Trading in Complex Options”

March 1, 2023

Retail trading in complex (multi-leg) options has grown significantly following the in- troduction of zero commissions by several brokerage firms. We show that the returns on these complex orders are negative on average (-16.4% over three-day holding periods), and that the higher the complexity, the lower the returns. We also find that a significant fraction (28%) of complex options trades are around firms’ earnings announcements, and these trades lead to significant losses.

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