Reddit’s WallStreetBets Pushed U.S. Stock Volume To March 2020 Levels. What’s Next?

Retail traders are not going anywhere—even after GameStop’s
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stock crash following the massive rally fueled by Reddit’s Wallstreetbets forum. These traders have pushed the U.S. stock volume to the pandemic’s stock market crash level. They are armed with stimulus check money due to the Covid-19 pandemic, and another round of checks is likely to vault the stock volume even higher.  

GameStop Stock And Retail Traders 

GameStop’s stock performance brought Reddit’s WallStreetBets forum into the media light. Retail traders gave nose bleeds to several hedge funds, which lost billions of dollars on their short stock bets. Hedge funds also lost money from investors as they pulled their money—a sign of losing confidence. Many investors want to take control back into their hands, and they believe that they have a real chance to profit in the stock market. 

The Dow Jones, S&P 500 and The Nasdaq
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Composite 

Retail trader participation has pushed the major indices towards all-time highs. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all set new records this week. The Dow has generally lagged in comparison to the two other indices, the S&P 500 and the Nasdaq, but the index picked up momentum this week. All three indices are on track to post their weekly gains as well.    

Are Retail Traders In Control of Stock Market? 

Evidence that retail traders are still very much in control of U.S. stock prices is reflected in the chart below. Generally speaking, there is a positive correlation between the volatility index (the VIX) and the stock volume, meaning when volatility in the stock market increases due to some uncertainty—more recently due to the coronavirus pandemic—the volume surges as well.

However, the below chart shows that the volatility index has dropped to its lowest level in two years (approximately), but the stock volume is set to surpass the level which was set during the worst of the pandemic panic last year. An average of 15.8 billion shares has exchanged hands daily on U.S. exchanges during the last 20 days. 

The massive advance in options activity (the more speculative market) within the U.S. stock market shows no signs of slowing down, either. A record number of call options (when traders are speculating that a stock price will rise) contracts have exchanged hands over the last 20 days. The below chart displays the call options traded.  

All of this is taking place due to the parabolic surge and crash in stock prices such as GameStop, AMC, American Airlines
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and many more. The recent IPO of Bumble, during which we saw the stock price surge over 50%, is further attracting retail trader’s attention. The new upcoming coronavirus relief package, which may include a stimulus check up to $1,400, will only increase retail traders’ firepower.  

Conclusion 

In summary, retail traders are still very much in the market, and there are no signs of stock volume abating.