There has been a lot going on in the options world that is impacting the stock market. The use of 0DTE (0 days to expiration) options has risen dramatically in recent months, options expirations have continued to be significant market moving events and an end of month trade by a JP Morgan fund many investors haven’t heard of has also been a significant market driver. We also have a major options expiration coming up this week that might have significant implications for the market. With everything going on in the options world, we thought it would be a great time to bring back our friend and options expert Brent Kochuba. Brent is the founder of SpotGamma and has been our go to resource to understand how what is going on in options is impacting the overall market. We cover all the issues above and get Brent’s take on what they might mean for investors. He also shares some great charts with us to help us better put everything into context.
02:22 – What are 0DTE options and what do they mean for the market?
07:06 – Who are the primary users of 0DTE options?
09:22 – Is 0DTE use taking away from options in further out expirations?
10:25 – Does the rise in 0DTE option use increase tail risk for the market?
14:58 – How long-term investors should think about the rise of 0DTE options
16:22 – What does the VIX measure?
19:00 – Does the rise in 0DTE option use distort the VIX?
22:15 – What is fixed strike vol?
28:21 – What Brent looks at to measure volatility
30:36 – Is rising volatility in an up market a warning sign?
33:29 – What Brent is seeing in this week’s options expiration
36:36 – What are the common characteristics of market moving options expirations
39:06 – Why the options expiration flip trade has stopped working
46:23 – What Brent is seeing in individual name options
52:55 – What is the JP Morgan collar trade?
Originally Posted June 17, 2023 – 0DTE Options, Fixed Strike Vol and the Impact of Options Expirations with Brent Kochuba
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Validea Capital Management and is being posted with its permission. The views expressed in this material are solely those of the author and/or Validea Capital Management and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Options Trading
Options involve risk and are not suitable for all investors. Multiple leg strategies, including spreads, will incur multiple commission charges. For more information read the “Characteristics and Risks of Standardized Options” also known as the options disclosure document (ODD) or visit ibkr.com/occ