ESMA issues warning on zero-day options ETPs

ETF stream09-11

The European Securities and Markets Authority (ESMA) has issued a warning on the dangers of zero-days-to-expiry options exchange-traded products (ETPs) after they have risen to popularity with retail ...

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Concerns have been raised that the high leverage of zero-day options can lead to one-directional trading,” ESMA said.“Depending on investor positioning, market makers must trade the underlying securities to keep their portfolios hedged, further exacerbating any price movements. ESMA will maintain vigilance in monitoring the potential implications for market stability.”According to ESMA, the growth in these products has contributed to the compression of the US volatility index, diverting trading away from the one-month-to-expiry-options used to calculate the CBOE Volatility index.However, the VIX compression has also been linked to the rise in yield-enhancing structured products linked to the S&P 500.ESMA noted: “It is possible that various factors are at play, including the overall market sentiment, and the increasing popularity of complex short-volatility strategies (of which yield-enhancing strategies are only one example), making use of the increasing range of short-term options.”","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466342405"}