0DTE
The acronym stands for "zero day to expiry" and involves option contracts that have less than one day to expiry date. According to J.P.Morgan the notional value of daily trading in 0DTE has increased to US$1 trillion.[1]
0DTE options trading has entered the mainstream in recent years and is a popular premium collecting strategy.[2] There are fears that the huge trading notional can influence and destabilize stock markets.
On short time scales the share price does not resemble the geometric Brownian motion but is better described by a jump process for the discrete tick-by-tick moves.[3] Therefore options cannot be priced using the Black-Scholes model but a discrete model such as the Korn-Kreer-Lenssen Model is more favourable.
References
- ↑ "Explainer: The rise of 0DTE stock options and how they could be a risk to markets". Reuters. February 22, 2023. Retrieved February 23, 2023.
- ↑ "Zero Days to Expiration (0DTE) Options and How They Work". Investopedia. February 22, 2023. Retrieved February 23, 2023.
- ↑ Scalas, Enrico (2022). "Mixtures of compound Poisson processes as models of tick-by-tick financial data". Chaos, Solitons & Fractals. 34 (1): 33–40. doi:10.1016/j.chaos.2007.01.047. ISSN 0960-0779.
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