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What 0DTEs Are Doing To Markets
When I talk about "brave new markets," I'm generally referring to market microstructure in general, but there's typically a "facet du jour," if you will -- some specific aspect that's piquing investor interest at any given time.
At various intervals, CTAs became an obsession for market participants keen to blame "the machines" during selloffs, for example. And during the pandemic equity bonanza, weaponized gamma was all the rage, particularly when it became apparent that the Reddit crowd was aw
VIX is a component of the Bloomberg Financial Conditions Index and perhaps of other FCIs. If 0DTEs are suppressing VIX, they are making FCI “looser”. I think. If true, this impact feels rather artificial, to me.
Remember: Close-to-close vol suppression would manifest in rVol.
Ah, how things have changed from when financial markets were venues where those needing capital met those with funds to invest.
Now? What percentage of GDP is accounted for by the financial sector?
When I graduated from B-school in 1982 my father asked me why I was hopping back into trading instead of going into a useful occupation like actually making things. I replied “because it’s fun!” but his question always lingered in my mind.
The intellectual, exciting, complex, interesting, puzzling, enervating – i.e. fun – aspect of the capital markets is, I think, the main reason to do it.
My first career was as a lawyer. Big firm, made partner, was asked to join some of my friends in starting our own firm, would have been very, very lucrative. Decided law was just not interesting enough to spend my one life doing.
This is way more fun. And the bad times are way less bad than in law – at least while you’re getting pummeled you are seeing history made, after a fashion.