Retail speculation is on the rise, with 0DTE options trading surging sixfold in the past five years. Retail traders now make up over half of all transactions, signaling a shift towards speculative gambling. This behavior is not new, as history shows markets peak when average investors chase risky returns. The surge in speculative trading extends beyond options to meme stocks, cryptocurrencies, and tech names. This trend is concerning, with retail investors risking losses while market makers profit. The market is vulnerable to a sharp correction, as seen in past events like Volmageddon and the COVID selloff.

Complacency among retail investors is high, with low volatility and record retail options activity setting the stage for a market correction. Despite warnings signs, retail traders remain overconfident, repeating cycles of speculation and market corrections. The market is loaded with speculative leverage and narrow leadership in mega-cap stocks, creating a fragile structure. Investors should rebalance portfolios, increase cash allocations, rotate into defensive sectors, and avoid excessive leverage to mitigate risk. The surge in zero-day options trading reflects an unhealthy market driven by speculation, not investment discipline, pointing to a potential correction.

Read more at Investing.com: Retail Speculation Is Back With a Vengeance