As retail investors gain access to more sophisticated trading strategies, zero days-to-expiration options are emerging as an intriguing choice.
The concept involves making a one-day bet on market trends, and CBOE Global Markets CEO Ed Tilly is at the forefront of this trend, with his company offering these options every weekday.
Tilly explained, “Expressing short-term market opinions has become increasingly attractive, generating significant interest.”
Zero days-to-expiration options are contracts that expire on the same day they are traded. Tilly believes their appeal lies in allowing investors to engage in the shortest-term investment possible.
“At the end of the trading day, the outcome of the trade is settled in cash, unlike stocks or ETFs which require physical delivery,” he clarified.
Are these options most effective for professionals?
Simplify Asset Management also offers zero days-to-expiration options and has found that they are particularly attractive to individual investors.
Michael Green, the firm’s chief strategist and portfolio manager, revealed that “about a third of our trades are from retail investors, while two-thirds are from institutional investors.”
However, Green cautions that although retail interest is growing, these options may be most effective in the hands of professionals.
“There is an important distinction between sophisticated retail investors and those who engage in speculative trading without a clear return profile. In general, the latter tends to lose more often,” Green explained.
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