This year's hottest deal on Wall Street - zero-date rights - is gaining favor with quantitative trading companies.。Banks such as Citigroup, JPMorgan Chase and UBS have begun to incorporate these highly speculative, short-dated option contracts into new systematic trading strategies offered to clients.。

Their "quantitative" division uses models and algorithms to make markets and place trades, using these controversial tools known as "ODTE" to propose solutions ranging from volatility hedging to diversified trading.。

The rise of zero-date weights in quantitative traders

0DTE refers to a "zero-day expiration" option contract with a zero expiration date.。Recently, such options have become popular among traders looking to make short-term directional bets on the market。

Banks bundle 0DTE with various volatility products, targeting premium sales, downside protection and relative value。The risk of an overnight gap is minimized as the 0DTE expires in one day。

Michele Cancelli, global head of trading and structural design for quantitative investment strategies at Citigroup, said: "It's not hard to convince people that these solutions are actually superior in terms of risk management.。"

JPMorgan (JPMorgan) uses the contract alongside index futures in its intraday momentum strategy, while UBS captures rising implied volatility through a specially designed short-term volatility trade for the previous month.。

The Cboe exchange's results last year already reflect the growing popularity of such options.。In August 2022, the S & P 500 SPX's 0DTE reached a record value.。

In addition, according to the Acuity Proprietary Trading Management Insights Report released in November 2023, half of the companies trading stock options are considering adopting an 0DTE strategy on the European Futures Exchange.。This indicates that the volume of the product may rise by 2024.。

Early competition stage

The surge in 0DTEs shows the increasing acceptance of them in the mainstream market, and such products are popular because of their low barriers to entry.。At one point this year, they accounted for more than 50% of S & P 500 options trading volume。

They are incorporated into systematic strategies, also implying an expanding range of use cases。risk of market distortions may be reduced as capital flows are dispersed。Economists, however, say close monitoring is essential for such fast-moving instruments。

Xavier Folleas, head of quantitative investment strategy at BNP Paribas, cautions: "If the market reverses, you may have to buy back your position.。"

Cancelli concluded: "The mania for 0DTE shows no signs of abating, and the quantitative race to develop products around them seems to be just beginning.。"We are still in the early stages of competition.。"