Two out of five (40 per cent) millennials trade options at least monthly, compared with 25 per cent of Gen Xers and 14 per cent of baby boomers, according to E*TRADE’s latest StreetWise quarterly tracking study of experienced investors.
The survey shows that investors as a whole are most likely to use options as a way to generate income, with 36 per cent of the survey population, followed by creating leverage (27 per cent), hedging against losses (25 per cent), and stock speculation (12 per cent).
Millennials, however, are the age group most likely to use options to create leverage, with 35 per cent of the survey population, while boomers are more likely than other generations to use options to hedge against losses, at 31 per cent of the population.
“Millennials are digital natives,” says Steve Claussen, VP of trader strategy at E*TRADE Financial. “And within this context it’s understandable why this group may also be the most active options traders, as today there are a great many digital tools that make options trading easier to understand than ever before.”
For millennials, more leverage means greater firepower. Millennials starting out in the investing world may be more likely to have less investable capital compared to older generations. Options may provide leverage for investors looking to gain diversified exposure to asset classes, without needing the capital to buy the underlying security outright.
For boomers, hedging against losses is part of prudent planning. With many boomers in or near retirement, adding protection against downturns in their nest egg can be a part of a sustainable retirement plan.