0DTE Craze Is Spilling into ETF Market. How Options-Income ETFs Have Performed So Far in 2023
The first ETF to trade in "zero-day-to-expiry" options (or 0DTEs) has launched in the US on Thursday.
0DTEs — contracts with a maturity of 24 hours or less that allow the purchaser to buy or sell a security or asset at a specific price at a specific time have surged in popularity this year and now account for 43% of overall S&P 500 options volume, according to Cboe Global Markets.
Defiance ETFs, a small Miami-based thematic house with $860mn in five ETFs, has become the first to launch a fund that sells zero-day-to-expiration (or 0DTE) options $Defiance Nasdaq 100 Enhanced Options & 0DTE Income ETF (QQQY.US)$ on the Nasdaq 100 as part of its strategy.
The fund will sell puts — bearish contracts that offer the buyer protection from index declines — to generate income. From the fund's point of view, these amount to bullish bets on the index. Should the benchmark rise, the ETF would pocket the premiums plus a limited amount of extra upside linked to the time-value of the contracts that were sold in-the-money.
Wall Street has been rushing to offer options-selling products over the past year, in part encouraged by the success of the $JPMorgan Equity Premium Income ActiveETF (JEPI.AU)$. That fund outperformed the S&P 500 by 15 percentage points during 2022's bear market, and has racked up almost $30 billion in assets in a little over three years. Money has kept flowing in despite lackluster performance in 2023.
Here is how options-income ETFs have performed so far in 2023.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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bindian : ETF initiator Defiance launched QQQY on Thursday, the world's first ETF to use 0DTE options or options contracts that expire on the day the contract is signed