Youtube is great. You can learn almost anything from youtube. What is less well known is that the people you learn from, aren't usually interested in teaching you anything. They are interested in selling you something, and making money for themselves in the process. It's called affiliate marketing.
The latest learning craze is around trading zero day to expiry options. 0DTE for short. And all the trading strategies you can use to make your first million dollars by doing almost nothing. The YouTuber pitch is "Just follow the rules and you'll get rich like me. You can even get a discount on my course and my favourite trading platform if you sign up using the link in the comment below".
Well, there are three statistics in the feeds inside RFPnetworks which are raising eyebrows:
1. 0DTE option notional volumes have now reached $1 trillion.
2. The market share of S&P500 ODTE options has increased 800% in 6 years to 40%.
3. It is estimated that around 50% of this market is now dominated by retail speculators.
Still don't care about these amateurs? Nor did the hedge fund managers trading GameStop back in January 2021. Until chatrooms in reddit resulted in what was unthinkable.
The likelihood is possible, but theoretical. A lot of things would have to line up for a flashcrash to occur, as a result of a chatroom driven en masse retail investor position on S&P500 0DTE options. The concern should not be focused on potential losses for institutional investors. They should know what they are doing, and know how to hedge their positions. Maybe it should be for retail investors selling puts or calls - their theoretical risk exposure is unlimited, and at 2000:1 leverage, a small move can have a life changing impact.
At the very least, institutional investors should be aware of how this instrument is gaining in popularity. And whether it is being used by their investment managers. If the GameStop saga is anything to go by, a lot of unproductive work gets created when the unthinkable happens. You can learn more about all the possible 0DTE option scenarios inside RFPnetworks.
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