No, 0DTE Will Not Result In "Volmageddon:" BofA Derivative Gurus Respond To Kolanovic

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by Tyler Durden
Wednesday, Feb 22, 2023 - 10:25 PM

One week ago, JPMorgan's Marko Kolanovic, who had urged clients to sell every rally since the September lows (after previously telling them to buy every dip ever since the all time high), lashed out at the very structure of the market in hopes of sparking more risky sentiment and spooking the marginal buyer, when instead of relying on conventional tropes to convey his bearish message (fundamentals, geopolitical risks, hawkish central banks, i.e., things that have been long ago priced-in), he decided to invoke one of the hot buzzwords of 2023 finance, namely 0DTE (or zero-days to expiration) options, warning that this relatively opaque corner of finance is a potential ticking time bombs embedded within the market's microstructure, and could be enough to bring about a new Volmageddon-like crash.

Having previously discussed the issue of 0DTE (we profiled 0DTE first in late 2022 in "What's Behind The Explosion In 0DTE Option Trading", and more recently here "Why 0DTE Is So Important, And Why The VIX Is Now Meaningless"), we disagreed with Marko's hyperbolic conclusion, taking a somewhat more sarcastic view of things, namely that "every market period has a distinct bogeyman for when a trade doesn't go your way: "8 years ago, every most hated rally was "explained" with HFTs; 4 years ago it was gamma. Now it's 0DTE."