The short answer is that they are really complicated, and because they are not mainstream in the UK, people don’t talk about them and because people don’t talk about them, people don’t trade them.
Plus, in the UK, if you want to trade on margin with leverage, we have financial spread betting, where you don’t pay tax on any of your profits.
Or, if you are a more sophisticated trader and want direct market access to work orders inside the bid and offer, you can trade CFDs.
In America, you can’t because they like to keep all their business on regulated exchanges, but you can trade on margin, where your broker lends you money to fully take on a position.
The UK’s established leveraged trading products
One obvious difference between Britain and America is CFDs and spread betting.
CFDs have been available to UK retail traders for decades, allowing investors to go long or short on shares, indices, currencies and commodities using leverage.
In the US, retail CFDs are effectively prohibited. Investors wanting leveraged exposure have instead gravitated towards exchange-traded products, particularly options.
The Investor Summit panel argued that this has created two very different trading cultures. US investors have become accustomed to buying calls and puts, while British investors wanting similar leveraged exposure have traditionally opened a CFD or spread betting account.
UK investors don’t understand them
UK investors already trade CFDs, spread bets, crypto and other high-risk products, suggesting a lack of risk appetite isn’t the obvious explanation.
Options have historically been less prominently offered by mainstream UK investment platforms and can appear considerably more complicated. Investors need to understand concepts including calls, puts, strike prices, premiums, expiry dates and volatility before getting started.
That’s very different from the apparent simplicity of clicking “buy” or “sell” on a CFD trading platform.
Do brokers actually want investors trading options?
Another arguement is that CFDs can generate substantially more revenue per customer for brokers than exchange-traded options.
If that’s the case, established CFD providers have had relatively little commercial incentive to encourage their customers to switch to another product.
There are important structural differences too. CFDs are generally over-the-counter products provided by a broker, whereas listed options are traded on an exchange with visible market prices.
America shows how quickly things can change
The US provides an indication of what could happen if options become more accessible in Britain.
Options trading volumes have increased dramatically, with particularly strong growth in short-dated contracts.
Based on the latest data from Cboe, the average expiry selected by retail options traders had fallen from around 33 days several years ago to about 11 days, while the average holding period on its own platform was just three days.
Zero-days-to-expiry, or 0DTE options have become particularly popular because they allow investors to take a position on a specific event, such as company results or an interest-rate decision, without paying for weeks of additional time before the option expires.
However, that also makes them exceptionally risky: a 0DTE option can become worthless within hours.
Could options become mainstream in the UK?
I don’t think they will, which is a shame becuase I really like trading options.
They are a great way to hedge a portfolio, or to take limited risk position when speculating.
The interesting question is therefore whether UK investors don’t trade options because they don’t want them, or simply because they haven’t been offered them.
UK investors have always been able to trade options, most CFD and spread betting brokers offer them on major markets.
When I was a stock broker at a very traditional firm, if you wanted to trade an option all you had to do was ask a dealer and they’d do it for you.
I think what we probably need to get the UK trading or using options is some really cool social content.
But we can’t do that because we’d be told off by the FCA, fined and probably sent to jail.
If you want a good options educational course, go to the Cboe’s Options Institute.
Or for a bit more fun, check out Liz and Jenny
Both are from America, but people only trade the SPX anyway, so that doesn’t matter.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
