Tariff news has led to a volatile stock market over the past few months, but retail investors have been happy to use that as an excuse to buy the dip. And as President Donald Trump’s April 2 tariff announcement rapidly approaches, those investors are doubling down.
“They’re either about to be proven spectacularly right… or spectacularly wrong,” investor-research firm Vanda Research wrote in a note.
Data from Vanda Research showed that many retail investors are taking a bullish position in response to the tariff-led stock-market selloff. Since the S&P 500 SPX hit its all-time high on Feb. 19, investors have poured over $32.9 billion into U.S. stocks. According to Vanda, this retail buying ranks in the 97th percentile for any 24-trading day stretch since 2014 — meaning individual investors have been putting more money into the market than almost any other one-month period over the past decade.
But what’s also notable is that investors aren’t just buying stocks, they’re also buying options. Marco Iachini, senior vice president of research at Vanda, noted a significant jump in investors buying options and a scaling back of buying equities.
The options these investors were buying were net bullish, based on the premium of out-of-the-money call options traded. Buying a call option gives an investor the right to buy a certain stock at a set strike price by a certain time. So buying an out-of-the-money option reflects a bet that the share price will go up in the near future. This is contrary to a put option, which allows an investor to sell a stock at a certain price, and is generally a bet the price will go down.
“Options stood out because of the uptick on Monday ran counter to weaker buying of cash equities,” Iachini told MarketWatch.
Also read: Why stock-options traders seem unfazed by the April 2 tariffs deadline
The jump in options comes after two weeks of “aggressive” dip-buying for stocks. Equity buying and options buying tends to be positively correlated for retail investors, so when there’s an uptick in one there’s often an uptick in the other. But the fact that options buying ran counter to equities could suggest that investors are taking a more tactical approach ahead of the April 2 tariff announcement.
Iachini hypothesizes that this could mean a few things. Investors could be using options to take some chips off the table. Options can require less upfront capital than buying shares, so investors may be using them to gain exposure while also hedging a bit. Or the bump in options-buying could mean that investors are starting to expect the market to rebound. Iachini pointed out that there was a similar trend in retail options-buying in August 2024, after the stock market fell quickly in the first half of the month.
“Monday’s pickup in options activity raises the question: Is this caution ahead of April 2’s ‘Liberation Day’ or a sign of growing conviction?” Vanda’s note read.
Options aren’t the only way that investors are putting their money to work. Despite a recent switch to options, retail investors are still buying plenty of single stocks and ETFs.
Investors have continued to favor the so-called Magnificent Seven tech stocks, despite the fact that almost all of them have underperformed this year. Meta Platforms META is the only Magnificent Seven stock that is positive in 2025, up around 3.5%.
Still, the tech selloff has prompted investors to buy the dip. Mag 7+ stocks — which includes Netflix Inc. NFLX in addition to the other Magnificent Seven stocks — have accounted for up to 35% of all retail inflows, according to Vanda Research.
Of the Magnificent Seven, Tesla Inc. TSLA has recently drawn investor attention. This comes after Trump and Commerce Secretary Howard Lutnick both used their platforms to support Tesla. But investors have also gotten behind Tesla as a result of the recently announced tariffs on imported automobiles.
While an increase in purchases of Magnificent Seven stocks further concentrates retail investors’ portfolios in tech, the tariff news has also motivated investors to broaden out.
Shares of Ford Motor Co. F have also benefited from the announcement of the auto tariffs, with retail investors piling into the stock at the highest rate since 2021.
On top of that, investors are responding to tariffs by buying more international stocks. Individual investors have bought nearly $200 million worth of Europe-focused ETFs over the past month, matching other peaks since the COVID-19 pandemic, according to Vanda. However, purchases of European ETFs still fall short of 2015 and 2017 levels.
Iachini told MarketWatch that the level of buying still may be too small to have a noticeable impact on European stocks, but it’s still noteworthy for this group of retail investors, which are usually very focused on U.S. stocks.
Watch: Does ‘buying the dip’ work? What history says about market sell-offs.