According to CBOE data almost 60% of all SP500 option daily volume now comes from the most extremely speculative and leveraged instrument of them all: Zero Days To Expiration options, or 0DTE for short. While they do have uses for institutions (eg index fund balancing), they are now used mostly as lottery tickets.
Apparently, these have now become very popular with retail “investors” who have piled into them in force during the last few months and are causing large distortions in volatility.
Since options market makers must hedge their intraday exposure on 0DTE, they are forced to buy (or sell) the underlying index or individual stocks, magnifying the intraday moves.
This explains the recent erratic behavior of indexes - they seem to spike or fall off a cliff within seconds.
One more layer of unregulated leverage - what could possibly go wrong…?
Addendum: after writing the above I realized I had seen this before, figuratively speaking. This is the 21st century equivalent of “bucket shops” which were hugely popular with punters in the early part of the previous century. The similarity is really uncanny.. see Reminiscences Of A Stock Operator.
well, if you are interested, I can guarantee you that A.I. is most definitely a bubble. Singularity is not round the corner, and a lot of the papers are just frauds. If I have time, I might be able to create a study that the layman can understand... but as of now, can just take my word.
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