It is a complex trading strategy that is becoming more accessible to retail investors.
Strategy: Options have no expiration date — essentially a one-day bet on the direction of the market.
And the CEO of CBOE Global Markets, Ed Tilly, understands that well. His company offers them all five days of the week.
“It really gets hot and gets a lot of interest being able to express that opinion [on the market] in the short term,” Tilley told CNBC.next to ETF“early this week.
Options with no expiration date are contracts that expire on the same day they are traded. Tilly believes these options appeal to investors by allowing them to invest for the shortest amount of time remaining in the contract.
“At the end of the trading day, the outcome of that trade is settled in cash — not physically delivered like stocks or ETFs,” he said.
Most effective as a tool for professionals?
Simplified Asset Management also offers these zero expiration date options. Michael Green, the company’s chief strategy officer and portfolio manager, also notes that they’re especially appealing to individuals.
“About a third [our] transactions come from retail and about two-thirds come from institutions,” he said.
Despite the increasing retail interest, Green emphasizes options with no expiration date can be the most effective tool for professionals.
“We use the phrase sophisticated retail investors, and I think there’s actually a really important distinction there,” says Green. “In general, people who are buying options on a consistent basis are doing more speculative activity than they are actually being sophisticated in terms of payback profiles. It tends to be a losing bet.”
