New research by London Business School academics Dr Svetlana Bryzgalova, Professor Anna Pavlova and PhD candidate Taisiya Sikorskaya, and reported by Bloomberg, shows amateur investors lost more than US$1 billion trading options during the pandemic.
The authors identified several factors leading to the losses, including a possible failure by novice investors to fully account for indirect trading costs when trading through zero-commission platforms such as Robinhood.
“The more they trade, the more they lose because of these bid-ask spreads - every time, they have to pay the round-trip trading costs,” Professor Pavlova told Bloomberg.
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