Retail investors are beginning to reduce leverage in options and margin accounts after activity reached historically extreme levels. According to JPMorgan, this shift could create a significant headwind for technology stocks.
In a recent analysis of leverage across different investor groups, the bank highlighted early signs that speculative activity may have peaked.
Retail Options Activity Retreats From Record Levels
JPMorgan analyst Nikolaos Panigirtzoglou said retail call option activity peaked on June 5 at nearly 14 million contracts.
The bank measured activity using exchange-traded call option purchases from customers trading fewer than 10 contracts. The latest peak was comparable to previous highs recorded in October 2025 and November 2021.
Following both previous peaks, technology stocks entered corrections that lasted several months.
Panigirtzoglou noted that investor capitulation eventually occurred when call option activity dropped to between 2 million and 4 million contracts.
Margin Account Leverage Remains Historically High
JPMorgan also warned that leverage in U.S. individual investor margin accounts remains extremely elevated by historical standards.
However, the bank has identified tentative signs that margin borrowing has started to decline in recent months.
This year’s leverage peak was similar to the levels reached at the end of 2021 and in mid-2018. Both periods were followed by multi-month equity market corrections.
These historical patterns suggest that falling retail leverage could increase pressure on technology stocks and the broader market.
Risk Parity Funds Begin Deleveraging
Risk parity funds are showing clearer evidence of reducing their market exposure.
JPMorgan’s implied leverage indicator has declined in recent weeks after reaching its highest level in more than a decade during mid-May.
Meanwhile, signs that leverage among hedge funds and banks has peaked remain less convincing. The bank described these signals as more tentative.
Corporate and Household Debt Poses Less Risk
Despite concerns about investor leverage, JPMorgan offered a more reassuring assessment of the wider economy.
Corporate and household leverage has declined since the pandemic. As a result, the bank believes these sectors currently present limited vulnerability to major macroeconomic shocks.
This reduces the risk that financial pressure among investors could immediately spread into the broader economy.
Leveraged ETFs Could Amplify Tech Stock Volatility
JPMorgan also identified leveraged exchange-traded funds as an important force behind recent movements in technology stocks.
Leveraged ETFs currently manage approximately $247 billion in assets worldwide. Many of these products have a strong focus on technology-related investments.
Their growing market presence may have amplified gains in technology stocks during the recent rally. However, they could also intensify losses if investors continue reducing leverage and market sentiment weakens.
