Retail traders have become a disruptive force in the U.S. options market, pushing volumes to record highs and reshaping the dynamics of short-dated volatility. While technology has made trading easier, some argue it hasn’t necessarily made traders smarter. According to David Chau, founder of SPX Management, and longtime observer of retail behavior, the real transformation has come not from “access—but from psychology”.
“People are looking for fast money,” Chau said. “Zero-DTE options make it feel like that money is right there, ready to be grabbed. But the way those contracts are priced, they work against most traders. For a lot of people, it becomes gambling,” he told Traders Magazine.
Over the last two years, 0DTE contracts have become a favorite among retail traders, who often chase volatility around economic events, earnings releases, and intraday market swings. But Chau argues that the market is rarely offering an edge to those who act on reaction. “Everything is already priced in,” he said. “Whatever momentum you think you see, it’s already in the options chain. The market is efficient.”
This idea—that information is always priced in—conflicts with how many new traders are taught to think. Chau points to the rise of social trading communities, Discord groups, and Telegram channels that emphasize discretionary decision-making and group consensus over statistical edge. “You get a handful of people throwing out charts, and others following without understanding the trade. It’s emotional,” he said. “It’s not trading. It’s crowdsourcing bias.”
Retail enthusiasm, he noted, doesn’t often come with structured planning. “People don’t think about exit strategies or trade structure,” Chau said. “They buy weekly calls or puts and let them expire worthless. There’s no plan to adjust, hedge, or convert into equity. They’re just hoping it goes their way.”
Even among traders who move beyond outright calls and puts into spreads or more complex positions, Chau said the same issues persist. “People underestimate how much time decay, volatility crush, and poor sizing hurt their trades,” he said. “They might enter a decent setup, but they don’t know what to do if it moves against them.”
He believes that one of the most common misconceptions in the options space is the overvaluation of win rate. “You could win nine trades in a row and lose money on the tenth if your risk wasn’t managed,” Chau said. “That’s the problem—everyone thinks high accuracy equals profitability. But it doesn’t. It’s about positive expectancy.”
Chau offers a basic model to illustrate his point. “Let’s say you flip a coin, and on heads you win $20, but on tails you lose $10. It’s still a 50/50 coin, but over time, you’ll make money. Most people wouldn’t take that trade, though. They’re more afraid of losing $10 than excited to make $20. That’s risk aversion at work.”
He added that despite the explosion of free educational content—YouTube channels, online courses, PDFs, and chatroom analysis—many retail traders are still misled by oversimplified signals. “Five traders can look at the same chart and come to five different conclusions. It’s all interpretation,” Chau said. “You need a process, not just an opinion.”
In Chau’s view, what separates long-term survivors in the options market from the rest isn’t edge in prediction—it’s discipline in execution. “Speculation and discretion kill most traders,” he said. “They’re making decisions off emotion, not data. That’s why most retail portfolios trend to zero over time.”
When asked about the impact of regulation, Chau sees it as largely irrelevant to these problems. “Aside from the pattern day trading rule, there’s not much standing in the way,” he said. “The real issue is that most people don’t understand the product they’re trading. Options are complex, and the pricing models aren’t intuitive unless you really dig in.”
Chau also believes that risk is entirely relative: “What feels risky to a beginner might look routine to someone with experience.”
“I’ve traded through every kind of market, and I’ve seen certain setups a hundred times. But for someone new, it’s overwhelming. They’re not reacting to risk—they’re reacting to uncertainty,” he said.
Despite his criticisms, Chau isn’t pessimistic about retail’s future. He’s seen examples of traders who evolve, find structure, and begin to approach markets with a statistical mindset. But he remains realistic about the odds. “Most won’t make it,” he said. “But the ones who stop guessing and start thinking probabilistically—they’re the ones who have a shot.”