’99 – ’00 redux

Many can recall the speculative fervor that attended dot.com mania in 1999-2000 which largely involved options. Options trading is back and in a big way.

This is from a Jan. 30 Marketwatch article with the subheadline: “Individual investors pile into out-of-the-money calls seeking “lottery”-type wins.”

As shown on the bottom two graphs on this chart, by the middle of 2020, call buying to open trades by both large and small traders quickly shot to its highest levels in 20 years.

The speculative fervor to bet on rising stock prices mostly remained there for the balance of the year.

In a December surge, the percentage of large trader option volume that went to buying calls matched the March 2000 peak, rising to 43% for three consecutive weeks.

The week of December 11, small trader call buying jumped to 54%, a new record high.

On a five-week basis, both groups set records in December, 42% for large traders, 52% for small.