The ETF industry is experimenting with zero-day options

It is a complex trading strategy that is increasingly suitable for retail investors.

Strategy: Zero-Day Options – Essentially a one-day bet on the direction of the market.

Ed Tilly, CEO of CBOE Global Markets, is in the middle of it all. His company covers them all five working days.

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

A zero-day option is a contract that expires on the day it is traded. According to Tilly, these options are attractive to investors because they allow them to make the shortest possible investment over the remaining term of the contract.

“At the end of the trading day, the next outcome of that trade is settled in cash, rather than physically delivered like a stock or ETF,” he said.

The most effective tool as a professional?

Simplified Asset Management also offers these zero-day expiration options. Michael Green, the firm’s chief strategist and portfolio manager, also noted that they have become particularly attractive to individuals.

“About one-third of (our) transactions come from retail and about two-thirds from institutions,” he said.

Despite growing retail interest, Green emphasized that the zero-day expiration option may be the most effective tool for professionals.

“We use the term sophisticated retail investor, and I think there’s actually a very important distinction,” Green said. “In general, those who consistently buy options are speculating with more complexity than they actually have in terms of returns. It’s often a losing bet.”


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