Lindsay Zhu
Class of 2026South Pasadena, California
About
Hi my name is Lindsay Zhu! I am currently writing a research paper about options market dynamics called The New Normal: How COVID-19 Redefined the Options Market Landscape. I chose to work on this project, because recently I've seen a surge in the trend of option trading on various major exchange sites, social media, and in the people around me. Furthermore, options, an asset mainly traded by institutional investors, have been more widely accessed due to COVID-19. These observations I made prompted me to investigate the market and analyze this new market entrant in the options market: Retail investors. After completion, I would like to publish my findings as well as share them on conferences to further spread my insight on the democratization of the options market.Projects
- The New Normal: How COVID-19 Redefined the Options Market Landscape with mentor Clay (Dec. 31, 2024)
Project Portfolio
The New Normal: How COVID-19 Redefined the Options Market Landscape
Started Aug. 20, 2024
Abstract or project description
This study investigates how the COVID-19 pandemic conditions influenced the dynamics between retail and institutional option trading. Before the pandemic, institutional trades influenced the options market; However, the pandemic led to a surge in retail participation, and an option trading behavior unseen before dominated the market. Post-pandemic, while retail activity remained prominent, market dynamics stabilized. Key factors such as lowered commission costs, heightened market uncertainty, and unique circumstances, such as lockdowns, led to a cascade of events that ultimately catalyzed the growth of retail option trading by reducing traditional barriers prior to COVID-19 like financial knowledge gaps and high capital requirements. By employing and analyzing lagged and regression models, this paper examines the effects of VIX metrics, S&P 500 performance, and their joint effect during different time periods on the CBOE put-call ratio. Furthermore, data on average daily volumes, expiration dates, trade sizes, and underlying assets of options are assessed to identify activity patterns of retail and institutional participants. These methods provide a detailed analysis of how market dynamics evolved across three distinct periods: before, during, and after the pandemic. This paper offers insights into how trading volume, volatility, and behaviors were reshaped during this transformative period, and the big picture of the option market evolution.