big risk? Retail bets on zero-day options are on the rise

The Etf Industry Frolics With Endless Options From Day To Expiration

It is a sophisticated trading strategy that has become accessible to retail investors.

Strategy: Zero days to expiry options – basically a one day bet on the direction of the markets.

And CBOE Global Markets CEO Ed Tilly is in the midst of a crisis. His company provides them every five business days.

“It became really attractive and I had a lot of fun being able to express that opinion [on the market] In the short term, Tilly told CNBC’s “ETF Edge” earlier this week.

Zero days to expiration options are contracts that expire on the same day they are traded. Tilly believes these options are attractive to investors by allowing them to invest for the shortest amount of time left on the contract.

“At the end of the trading day, the outcome following that trade is settled in cash — not physically delivered like stocks or ETFs,” he said.

Most effective as a pro tool?

Simplify Asset Management also provides zero options until this expiration. As Michael Green, the company’s chief strategist and portfolio manager, notes, they’ve become particularly attractive to individuals.

About a third [our] Trade comes from retail, and about two-thirds of it comes from establishments.”

Despite the growing interest in retail, Green stresses that zero-days-to-expiration options may be more effective as a tool for professionals.

“We use the phrase savvy retail investors, and I think there’s a really important distinction there,” Green said. “In general, those who buy options on a consistent basis are speculating more than they are actually sophisticated in terms of the return profile. It tends to be a losing bet.”

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