POPULARITY SURGESĭata from Cboe Global Markets shows that '0DTE' options have grown in stature over the past several months. Their '0DTE' options positions are much more likely to be hit by 'unknown unknowns' at random times. This nods to the Rumsfeldian world of 'known unknowns' and 'unknown unknowns.' Calendar event risk, or 'known unknowns,' may unleash market volatility, but investors can hedge or sit on the sidelines. "On 'non-event days' there is more chance of an unexpected market shock, in which case investors may face greater losses in their short option positions, and that may increase intraday volatility," he added. (and) because of that, they have more potential to increase volatility on 'non-event days,'" Cheng said. "These options are being used more now for systematic trading, which is surprising. But on 'non-event days,' speculative activity increases. Investors know the event risk so they tighten controls, and are generally more cautious.Īll else equal, this helps reduce systemic risk to the wider market. Peng Cheng, one of the authors, says this kind of scenario is less likely to play out on 'event days' like nonfarm payrolls data or Fed policy decisions. But even the less gloomy hypotheticals outlined in the report, such as a sudden 1% or 2% slump, still pointed to an even greater selloff than the original fall. Understandably, a potential 25% crash in one day garnered a lot of attention. In a report published earlier this month, analysts at JP Morgan sketched out a worst-case scenario in which these options could trigger an intraday 25% rout in the S&P 500 if they are unwound following an initial, sudden 5% market drop. employment and inflation data releases, or Federal Reserve interest rate decisions.īut they are attracting the attention of more speculative parts of the investment and trading community, at a time of increased market fragility due to higher interest rates, an unfolding banking crisis, and growing fears of wider economic and financial turmoil. So-called 'zero days to expiry' or '0DTE' options, are designed for institutional investors to hedge their exposure to outsized price swings on days of known event risk, such as U.S. equity options should help protect investors from violent intraday price swings, but their popularity at a time of rising market instability could have the opposite effect. ORLANDO, Florida, March 17 (Reuters) - Ultra-short-dated U.S.
0 kommentar(er)
