Too risky? Retail betting on zero day options is on the rise

Harris Marley
Harris Marley

Global Courant

It is an advanced trading strategy that is becoming increasingly accessible to retail investors.

The strategy: zero days to expiration – which is essentially a one-day bet on the direction of the markets.

And Ed Tilly, CEO of CBOE Global Markets, is right in the thick of it. His company offers them all five days of the week.

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“It’s become really attractive and generated a lot of interest in being able to express that view (in the market) in the short term,” Tilley told CNBC’s “ETF Edge” earlier this week.

Zero days-to-expir options are contracts that expire on the same day they are traded. Tilly believes these options are attractive to investors because they allow them to invest in the shortest amount of time left in a contract.

“At the end of the trading day, the next outcome of that trade is settled in cash — not physically delivered like a stock or an ETF,” he said.

Most effective as a tool for professionals?

Simplify Asset Management also offers these zero day-to-expiry options. Michael Green, the company’s chief strategist and portfolio manager, also notes that they have become particularly attractive to individuals.

“About a third of (our) transactions come from the retail sector and about two-thirds come from the institutional sector,” he said.

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Despite the growing interest in retail, Green emphasizes that zero-day-to-expiry options can be the most effective tool for professionals.

“We use the term sophisticated retail investors, and I think there’s actually a really important distinction there,” Green said. “In general, those who regularly buy options speculate more than they actually perfect in terms of a return profile. It’s usually a losing bet.”

Too risky? Retail betting on zero day options is on the rise

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