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The impact of mobile trading platforms on the implied volatility of equities
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School of Business |
Bachelor's thesis
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en
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20+7
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This thesis explores whether mobile trading platforms have increased the cost of equity options by raising implied volatility (IV). With the rise of commission-free apps like Robinhood, retail investors now play a larger role in the options market, often favoring short-term, out-of-the-money contracts. A literature review and data analysis using a Wilcoxon rank-sum test and linear regression on IV data from nine retail-favored stocks show a clear post-2018 increase in IV. Existing research suggests it may not be fully explained by changes in historical volatility. The findings imply that retail trading activity may contribute to higher option prices, creating potential mispricing opportunities for more sophisticated investors.