Strategists at JPMorgan Chase & Co. see the risk of a “Volmageddon 2.0” that could affect the market as a result of increased trading in ultra-short-term options with less than 24 hours to maturity. He again elaborated on his claim that it would increase This claim is controversial.
A 5% drop in the S&P 500 Index could result in an additional 20% drop in a worst-case scenario of light trading in the extreme event of all traders exiting zero DTE options, new research finds. Trial calculation results were obtained.
These studies show that the bank’s own warnings comparing the recent boom in trading at zero DTE to the spike in volatility in February 2018The aim is to refute the view that it has gone too far. According to JPMorgan estimates, the notional value of zero DTE is about $1 trillion (about 136 trillion yen) per day.
In a report dated June 6, the team led by Peng Cheng said, “The estimated market impact of zero DTE unwinding exceeds the initial market shock in all scenarios. “It highlights potential risks to stability.”
In order to deal with the threat associated with the zero DTE boom, the challenges are the size of the option market, the short period of zero DTE, and the uncertainty surrounding the users of such transactions. While some on Wall Street see zero DTE as a derivative to reduce market volatility, JPMorgan’s team sees it as a source of extreme volatility.
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Source: JPMorgan
news-rsf-original-reference paywall">Original title:JPMorgan Spells Out ‘Volmageddon’ Risk on Zero-Day Option Craze(excerpt)
