"It's Not Retail" - JPMorgan Defends 0DTE 'Volmageddon 2.0' Risk Warning

Tyler Durden's Photo
by Tyler Durden
Monday, Mar 06, 2023 - 11:40 PM

In mid-February, when stocks were making a mockery of his repeated weekly forecasts of market gloom and doom, JPM's former in house permabull-turned-permabear, Marko Kolanovic tried to spook traders by suggesting that Wall Street's rising boogeyman (just like gamma and HFT before it), 0DTE, would lead to a second Volmageddon. And since Marko was once a respected derivatives strategist, many immediately took his words to heart and freaked out... but not everyone, and those who actually understood how 0DTE works, promptly found holes in his argument. The first one was Spotgamma (see "SpotGamma Responds To 0DTE Fearmongering"), followed promptly by Bank of America's impressive derivatives team (see "No, 0DTE Will Not Result In "Volmageddon:" BofA Derivative Gurus Respond To Kolanovic").

The BofA report prompted a frenzy of reader interest and a flood of comments and responses (Bloomberg published a belated note on the topic "Clueless Wall Street Is Racing to Size Up Zero-Day Options Boom"), and as BofA derivatives strategists Benjamin Bowler, Nitin Saksena and others wrote in their follow-up 0DTE note, the five most frequently asked questions were the following.

Simply put, they noted that the market is not the one-sided monolith that will set the stage for an incident such as the rout in February 2018.