Sunday, January 29, 2023

Quote of the Day: Yes, 0DTE Options are a Big Deal Right Here!

In Wednesday's video I made mention of the not-small (trust me!) impact that the large volume of zero-days-to-expiration options trading has been having on the overall market of late... Here's Hedgeye's Keith McCullough on the topic
"Right now, there’s a bubble in zero days to expiration (0DTE) options. North of 50% of the options traded every day expire within 6 ½ hours of the market open. Now we’re dealing with that, who’s bulling the tape to get S&P 4,000 to print, for instance. The volume of 0DTE call buying is changing market behavior – with a small number of dealers forced to hedge which suppresses volatility. But this dealer hedging works both ways and that’s why you’ve seen these wild moves in markets. You need to be careful and have a process for knowing the trend. When things unwind, they unwind quickly."

1 comment:

  1. Thanks Marty! This makes total sense and explains all the covering from the shorts. As a matter of fact, the shorts have lost $80 billion so far this year. They become greedy in gaining as much as $400 billion last year. I am with you that I am neither bullish or bearish (market is very dynamic). The Fed is unpredictable. According to Ken Fisher, as long as we have strong lending (which is now), soft landing is very possible. I didn't know until he explains about the typical 4-year presidency cycle.
    1. Year 1: Market is 50/50 positive.
    2. Year 2: If the market is very bearish, year 3 will be double bullish.
    3. We are in year 3 right now and we will see what happen.
    I am like you that I am fascinated with the market everyday.