Some Weird belief and misconception about 0DTE (Zero Day to expiry) options that most of the media want you believe, and why its misleading
Some Weird belief and misconception about 0DTE (Zero Day to expiry) options that most of the media want you believe, and why its misleading
Some Weird belief and misconception about 0DTE (Zero Day to expiry) options that most of the media want you believe, and why its misleading
There are a lot of things most people don’t know 0DTE (Zero Day to expiry) options
For example, here are few examples
0DTE options are driving all the volume
0DTE options volume is all driven by retail
0DTE options are the cause for lots of models and products broken
For anyone in the industry, or some basic knowledge about the option they can easily figure out all this is far from reality.
I will refute all these “myth and click bait headlines” by giving you logical explanations
There is no naked selling on both call and put side from retail investors.
Just by nature realized volatility vs. implied volatility can be in a wide range, and it can vary a lot i.e. wider range or realized vs. quoted volatility on short time horizon (esp. for one day).
Minimal capital usage as you are just betting on outcome on One day time horizon
Built-in stops (if long), as you will end up losing the premium you paid
Built-in premium capture (if short) with same directional risk as futures and some Optionality component over one day
Flexible management (roll vanillas into spreads) or roll them to next day or week
But to those who haven’t lived “a day in the life” in real option trading, some of these might come as a shock.
Instead of writing why the 0DTE (Zero Day to expiry) are risky, the MSM will do more service to common masses if they talk and write about why the saving and checking accounts at all major banks are not paying the rates close to fed fund rates.
Crazy, right? That they will keep quite. (you know why? its all about Ad revenue for MSM)
Right now 0DTE options are available on major broad indices ETF’s like SPY (SPX 500) and IWM(Russell 2000), and over time this should extend to more ETFs and indices and further expand the option market.
A few popular twits on the same theme about the volume and potential mispricing of the volatility risk
And Another one on volume of these options as significant daily percentage of notional volume.
