0DTE
- Thread starter ETJ
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I note this in particular:-
"7. What effect is this having or can have on the broader market? Does this in some way increase or decrease market volatility? Why?
Our analysis is that 0DTE may suppress volatility over short periods of time but could actually increase volatility over longer periods of time. The logic is that anything that squeezes the market (VIX, realized volatility, or anything else) ultimately resurfaces at other times (i.e., the overall volatility level ultimately evens out). With 0DTE options, we believe that there is potentially a risk that if the trading activity is suppressing volatility (due to the counterparties/market makers hedging the 0DTE trades in the underlying index), then ultimately positioning could build up over time and can cause an explosion of volatility, potentially at the worst possible time"
"7. What effect is this having or can have on the broader market? Does this in some way increase or decrease market volatility? Why?
Our analysis is that 0DTE may suppress volatility over short periods of time but could actually increase volatility over longer periods of time. The logic is that anything that squeezes the market (VIX, realized volatility, or anything else) ultimately resurfaces at other times (i.e., the overall volatility level ultimately evens out). With 0DTE options, we believe that there is potentially a risk that if the trading activity is suppressing volatility (due to the counterparties/market makers hedging the 0DTE trades in the underlying index), then ultimately positioning could build up over time and can cause an explosion of volatility, potentially at the worst possible time"
intuitively you can see the late day strong bounce from the red morning session in the past few weeks, and more if the earnings guidance news are good. VIX from 16 to 14 period are worth to take a closer look.
0DTE, round the clock trading in ETFs. It's amazing how regulations allow degenerate gamblers to lose all their savings to line the fat pockets of the few market makers, brokers, and exchanges even further. It's as if the US can't rush fast enough to transfer ever increasing funds from the poor to the rich. All in the name of "more choices", lol
as the paper concluded, calls and puts are equally profitable strategy, what gives?