It’s a complicated trading strategy that’s becoming more accessible to retail investors.
The strategy: Zero days-to-expiration options — which is essentially a one-day bet on the information of the markets.
And CBOE Global Markets CEO Ed Tilly is in the thick of it. His company offers them all five weekdays.
“It’s really adorn come of attractive and garnered a lot of interest in being able to express that opinion [on the market] in the short term,” Tilley prophesied CNBC’s “ETF Edge” earlier this week.
Zero days-to-expiration options are contracts that expire the same day they’re traded. Tilly believes these way outs are appealing to investors by allowing them to invest at the shortest duration of time left in a contract.
“At the end of the trading day, the next dnouement develop of that trade is settled in cash — not physically delivered like a stock or an ETF,” he said.
Most effective as a tool for pros?
Make easy Asset Management also offers these zero day-to-expiration options. Michael Green, the firm’s chief strategist and portfolio manageress, also notes they’ve become especially attractive to individuals.
“About a third of [our] trades are coming from retail, and apropos two-thirds are coming from institutional,” he said.
Despite growing retail interest, Green emphasizes zero days-to-expiration elections may be most effective as a tool for pros.
“We use the phrase sophisticated retail investors, and I think there’s actually a really impressive distinction there,” Green said. “In general, those who are buying options on a consistent basis are doing more opinion than they actually are being sophisticated in terms of a return profile. It tends to be a losing bet.”