Schwab Study Finds Active Traders Like Volatility

Charles Schwab released a study today that found although active traders are feeling more optimistic, being properly hedged against risk is a concern for many.  

The latest “Charles Schwab Active Trader Sentiment Survey” polled more than 500 individual investors who trade frequently (at least 36 times per year). Of those, seven out of ten (71%) currently consider market volatility a friend, compared to 29% who view volatility as a foe.

Thirty-eight percent expressed a bullish outlook for the market in the next six months; up from 28% in the last survey published in April. Only 16% are bearish, compared to 21% in April. As bullish sentiment ticks up, traders are putting more money to work. Thirty-six percent of traders recently changed their portfolio allocation to include more cash, down from 43% in April.

However, only 14% of those surveyed say they are very confident that their portfolios are properly hedged against risk.

The study also found that nearly half (46%) of respondents report they are regularly trading options as a potential method of generating extra income. Ownership of foreign equities is also becoming more common. Fifty-six percent of active traders surveyed say they are exposed to foreign equities, predominantly through exchange-traded funds (ETFs) or American Depository Receipts (ADRs) of non-U.S. based companies.

Traders participating in the Schwab survey also show a clear preference toward technology stocks. Thirty-eight percent say they are now the most bullish on the technology sector, followed distantly by materials (17%), financials (12%), industrials (10%) and consumer discretionary (6%).