Jim Cramer warns against novice day trading, calls zero-day options ‘pure greed’

CNBC's Jim Cramer warned novices against day trading, referencing an article from the Wall Street Journal that described how more investors are developing serious gambling addictions to risky market trading.
"We need to help those who're getting addicted, and we need to stop those who might become addicted," he said. "After all, the markets were created for investing, not day trading on the direction of stocks. There's a big difference between making an informed investment and pure gambling."

CNBC's Jim Cramer on Friday warned novices against day trading, referencing an article from the Wall Street Journal that described how more investors are developing serious gambling addictions to risky market trading.

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"We need to help those who're getting addicted, and we need to stop those who might become addicted," he said. "After all, the markets were created for investing, not day trading on the direction of stocks. There's a big difference between making an informed investment and pure gambling."

The Wall Street Journal's Gunjan Banerji chronicled how investors, primarily men, are attending Gamblers Anonymous meetings and seeking treatment for compulsive gambling on the market. Banerji explained that many were drawn into trading and betting during the pandemic boom, adding that other risky activities like sports betting have risen in popularity. Like sports betting, she continued, apps make it easy for anyone to trade stocks and cryptocurrency. But while popular sports betting apps usually provide gambling warnings and hotlines, most brokerage apps do not do so, Banjeri wrote.

Cramer recalled that he was heavily involved in day trading 24 years ago, saying he felt the article described him in those days — but he emphasized that he was a professional with ample resources and a full-time research staff. He said he's now against that sort of risky action for anyone who's not a professional, and he instead recommends "only buy and homework," or investing to own, not to trade.

He especially decried trading based on zero-days-to-expire options, option contracts that can be used only during a single session. He said they are no different from betting on touchdowns on apps like DraftKings, which he suggested is a safer way to gamble because it is more honest about risks. He said there's no reason to drive people into zero-day options other than "pure greed," and said the industry is "encouraging bad behavior."

"Can we stop this gambling behavior? No, it's an instinct," Cramer said. "But can we certainly make a value judgment? And my value judgment is that those who have a huge stake in promoting options, brokerage houses that rely on feeding crack to the investing community, they need to be held accountable."