Retail Traders Have Now Officially Gone All-In: Call Buying Hits 4-Year High, Dow Clears 50,000, and Goldman Says the Data Backs More Upside

What Changed Since Our Last Report

When we last covered this story, retail investors were buying Nasdaq calls at the fastest pace since 2021. That trend didn't slow down — it accelerated.

Retail trading volumes are now up 28% since mid-April, according to Goldman Sachs. The S&P 500 has hit all-time highs. The Dow Jones Industrial Average crossed 50,000 for the first time. The Nasdaq-100 is up more than 16% year-to-date and set a new record earlier this week.

Retail traders are now driving the market.

Goldman's 'Up Crash' Note — And What It Actually Means

Goldman Sachs analyst Brian Garrett published a note to clients titled "Up Crash." The key finding: the correlation between the Nasdaq-100 index and the price of its one-month call option has gone positive for only the fourth time in the past decade.

At a reading of 0.4, it's the highest since January 2017.

According to Goldman's analysis, the average market return in the month following this signal is 2.7%, nearly double the normal 1-month average of 1.5%.

"Equity markets have crashed higher over the last month," Garrett wrote. "Many participants have suggested this is fuel for an unwind, but the data does not corroborate."

The last time this correlation was this high was 2017 — the calmest year in stock market history, when the VIX hit an all-time low of 8.56 and the S&P 500 rallied 20%.

But the very next quarter after that calm — Q1 2018 — was "Volmageddon." The VIX surged to 50. Short-volatility ETFs imploded overnight. It was ugly.

Goldman is correct that the signal historically precedes gains. The firm's note is less vocal about what can follow.

The Cboe Data Is Even More Striking

Retail traders are buying calls in what Cboe calls the "Mag 10" — the original Magnificent Seven plus AMD, Palantir, and Broadcom — at the heaviest 10-day clip since 2021, according to Cboe's own data.

Of new options positions opened, 52% were call-buying and only 17% were call-selling.

Mandy Xu, head of derivatives market intelligence at Cboe, put it plainly: "Hedgers have thrown in the towel. It's a consistent theme we're seeing, with people trying to catch up to the market rally through buying calls."

The price of Nasdaq-100 call contracts one standard deviation out of the money is at a 52-week high and near a three-year record, per Nations Indexes' 30-day CallDex Index.

Scott Nations, president of Nations Indexes, noted something important: "The story is not just that Nasdaq-100 calls are pricey, but that nobody seems interested in selling covered calls. That signals a whole other level of bullishness."

When nobody wants to sell calls against their positions, it means virtually every retail holder believes the stock is going higher. That level of unanimity has a name: a crowded trade.

Retail's Favorite Stocks — Winners AND Losers

Goldman Sachs broke down specific retail favorites. The winners are obvious: Nvidia (up 25% YTD, 15% of volume from retail), Micron (up 176% this year, 16% retail volume), and AMD (more than doubled, 16% retail volume).

Retail is also aggressively buying stocks that are going down.

American Airlines has roughly 27% of its trading volume dominated by retail — and it's down 17% this year. Nu Holdings has 21% retail volume exposure — and it's down nearly 22%.

Retail traders aren't just riding winners. Some are holding losers while calling it conviction.

Steve Quirk, chief brokerage officer at Robinhood, told Sherwood that "Robinhood traders are savvy, with a long-standing conviction in tech and innovation names." That description fits the Nvidia and AMD buyers. It's less accurate for the retail crowd down 22% in Nu Holdings.

Prediction Markets: Retail's New Gambling Window

Barclays analysts released a report this week calling prediction markets "retail's shiny new toy."

Kalshi and Polymarket combined notional volume hit more than $24 billion as of April — up from less than $5 billion a year ago. That's nearly a 5x increase in 12 months.

Monthly prediction market volume is now comparable to leveraged ETF volume — the same instruments using debt and derivatives to multiply daily returns. That's a significant threshold.

Barclays noted this is still behind zero-day-to-expiration (0DTE) S&P 500 options, which retail traders dominate and which account for over half of total S&P options volume. But prediction markets are closing the gap fast.

Jeff Kilburg, founder and CEO of KKM Financial, attributed the growth to accessibility: binary outcomes, broad event diversity, easy to understand. "It's a totally different animal," he said.

Retail speculation has expanded to a third major venue beyond stocks and options. More capital is chasing more speculative instruments simultaneously.

What the Mainstream Coverage Is Getting Wrong

CNBC and Bloomberg are framing this almost entirely as a triumph story — retail investors who bought the dip are being vindicated. That's partially true.

What's being underplayed: the concentration risk is extreme. Semiconductors are nearing 20% of S&P 500 market cap. The rally is narrow. Retail traders are piling into the same 10 names using margin and leveraged ETFs.

The VIX is sitting just below 18 despite record highs. That sounds calm. Single-stock volatility — measured by the ratio of Cboe's S&P 500 Constituent Volatility Index VIXEQ to the VIX — has widened to the 98th percentile. The surface looks calm. Underneath, individual stocks are swinging wildly.

A bull market balanced on a very narrow set of very crowded trades looks different from the inside.

The Data and the Risks

The rally has room to run. Goldman's analysis, the call-buying signal, the Volmageddon comparison — all of it suggests near-term momentum remains intact.

But every single indicator of speculative excess is now flashing. Retail investors with margin accounts and 3x ETFs are piling into a handful of AI stocks, buying prediction markets, and holding losers alongside winners without discrimination.

Goldman was right in 2017. They were also right right up until February 2018.

Ride the wave if you want. Just know exactly how close you are to the shore.