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November 8, 2024
PI Global Investments
Hedge Funds

Hedge funds rev up short-vol trade in zero-day options


Hedge funds are once more gunning their engines on the short-volatility trade – this time in zero-day options (0DTEs) – and with a downside limit. 

The strategy has led to outsize losses in longer-dated instruments in the past – notably during the so-called Volmageddon crisis of 2018, sparked by an industry-wide unwind of short-vol exposure.

But this time, funds are adding caps to limit potential losses. And in zero-day options, the available premium is higher, making the short-vol strategy more

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