Retail investors take over US stocks! "Zero-day options" account for over 60% of total US stock trading volume, while "fractional share" trading reaches 66%.

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Retail investors are dominating the US stock market on an unprecedented scale. As hedge funds and traditional institutional investors become increasingly cautious in the face of historically high stock prices, retail investors are reshaping the market landscape through options and small-lot stock trading.

On September 18, according to the latest data released by Goldman Sachs, the proportion of 0DTE options (same-day expiration options) trading volume to total US stock trading volume exceeded 60% for the first time in the third quarter, setting a record high. These high-leverage derivatives, known as "zero-day options," are favored by retail investors, whose dominance explains why every market dip is met with record-fast buying.

At the same time, data also show that "fractional share" trades—orders of fewer than 100 shares—reached 66% of all US stock trades in the third quarter, a sharp jump from 31% in January 2019. This key measure of retail trading now accounts for over 20% of notional trading volume and 8% of total executed shares.

Market experts point out that retail capital reserves continue to accumulate, with money market fund assets reaching a record $7.3 trillion, providing ample ammunition for further allocation into risk assets.

Retail Investors Dominate Derivatives Market with "Zero-Day Options"

The proportion of 0DTE option trading exceeding 60% marks a decisive shift in retail investors’ influence in the derivatives market. These same-day expiration options—due to their extremely high leverage and quick profit potential—have become the preferred tools for retail investors chasing short-term gains.

Goldman Sachs’ data shows this rapid increase contrasts sharply with the wait-and-see attitude of hedge funds and long-term investment funds as stock prices hit new highs. Institutional caution gives retail funds greater room to influence the market.

The dominance of 0DTE options directly impacts the market's price discovery mechanism and volatility traits. Whenever the market dips, retail investors rapidly buy large amounts of call options, quickly pushing prices up, creating the current unique pattern of "every dip is bought."

"Fractional Share" Trading Soars to Record Highs

According to the latest report from Goldman Sachs Electronic Trading, the proportion of "fractional share" trading surged from 31% in January 2019 to 66% in the third quarter, reaching a record high. This change reflects significantly increased involvement of retail investors and a fundamental transformation of market structure.

The main factors driving this growth include: increased retail participation, adoption of fractional share trading, market fragmentation, and advances in algorithmic trading.

Notably, 59% of stocks in the S&P 500 (293 out of 500) are priced between $100 and $1,000, and in this price range, 78% of trades are in amounts less than 100 shares.

Retail Capital Inflows Remain Strong

Data released by Scott Rubner, former Goldman Sachs liquidity analyst and now at Citadel, shows that retail investors continue to squeeze institutional investor market share, with net buying in 19 out of the past 22 weeks.

Even more notably, Citadel Securities’ individual stock clients have maintained a structural buying trend for 20 consecutive months in both notional value and share count.

According to seasonal trend analysis over the past eight years, September is usually the weakest month for retail demand, with a pickup in October and a peak in November.

Data from Goldman Sachs Electronic Trading show that last week, the net inflows from retail investors reached $16 billion, and overall trading volume rose 8% week-on-week to 17 billion shares, indicating sustained risk appetite.

It’s worth noting that despite heightened retail trading activity, off-exchange cash balances continue to rise. Cash reserves in money market funds have hit a record $7.3 trillion.

Scott Rubner raises a key question: As cash yields decline, when will these funds rotate into risk assets? The timing of this shift could have a significant impact on markets.

Risk Warning and DisclaimerThe market carries risk, and investment should be approached cautiously. This article does not constitute personal investment advice, nor does it take into account the individual investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions expressed in this article are appropriate for their specific circumstances. Any investments made based on this content are at their own risk. ```