
Nitin Saksena, Head of US Equity Derivative Research, BofA Securities
Alpha Exchange
The Vol Risk Premium on Zero Day Options
The one-day option or the zero dte option opens up almost a new area of investigation around vol risk premium. I'm remembering when they first started listing weeklies even though the s&p vol surface was really in deep contango super upward sloping it actually made more sense economically to sell the very short dated ones from a vol risk premium point and then just roll it over even at a lower vol level. The jury is still out truthfully on whether there's true alpha embedded in selling zero day options versus say one day or five day options but it does look interesting to sell zero day options we published some initial results a few weeks back which showed some pretty interesting results from just selling