Defiance ETFs is launching a fund on Thursday that sells ultra short-dated options on the Nasdaq 100 as part of its strategy. The product will be the first in the market to utilize so-called zero-day-to-expiration contracts, or 0DTE, as part of its design.
“Everybody is looking for that free money,” said Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group. “It fuels speculation.” “0DTEs have become the hot new thing and it was only a matter of time before ETF issuers incorporated them into a fund,” said James Seyffart, ETF analyst at Bloomberg Intelligence.
However, if the gauge falls below the strike price of a put, the buyer of the option can demand the difference between that threshold and the index level. If that is more than the premium received by the fund, the ETF faces a loss.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 ETF .