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If you are planning to invest in the US market or you are currently an investor, you must understand that the market now meets all the characteristics of the bubble, and what keeps it standing are two main factors: the liquidity of the stimulus programs and the weak control over retail clients’ trades that take place through options contracts.

Abstract

During the past few years, some adjustments took place in the markets, and access to trading options contracts by retail clients became more accessible, and after that the industry developed accordingly to facilitate access to trading options contracts until Robin Hood appeared to us, which made the process more cheap and easy, as it was helped by the means of communication This is in addition to the liquidity of the various government stimulus programs that were approved during the past years.

The values of retail clients’ trades in option contracts do not exceed a few thousand dollars, but what makes them influential in the market is that the financial companies based on the implementation and maintenance of option contracts are forced to protect themselves by injecting purchasing liquidity into the market that sometimes exceeds 200 times the value of the paid option contracts. retail client

Retail clients trade options contracts

In fact, the values of retail clients’ trades in option contracts do not exceed a few thousand dollars, but what makes them influential in the market is that the financial companies based on the implementation and maintenance of option contracts have to protect themselves by injecting purchasing liquidity into the market that sometimes exceeds 200 times the value of the contracts. Option paid by retail client. This means that when a retail customer buys an option contract with a value of $1,000 through the brokerage firm, financial companies pump up to $200,000 into the spot market or otherwise.

How long will that last?

The conglomerate transaction that took place on GameStop Corp. (GME) This problem has surfaced and all legislators, regulators, and politicians in the United States of America have paid attention to it, and some regulators have begun to investigate the matter, so it is not excluded that we see regulatory and legislative moves to study this incident and perhaps develop laws and legislation that limit its occurrence, especially since it happened in the form of clusters In public, as this phenomenon was recently demonstrated clearly by the tweets of Elon Musk (Tesla CEO) that affected the shares of multiple companies in the market and digital currencies.

According to my perception, the issue will take some time to see the seriousness of these moves, and with the approaching approval of a new government stimulus program, I do not rule out the continued rise of US stock market indices to new unprecedented levels of up to 4,500 points for the S&P index, for example, with the influence of the shares of Amazon, Facebook, Google and Apple (due to weighing in the index), but it is likely that we will see legislative and regulatory steps before the middle of the current year 2021 AD that could have an important role in ending this bubble.