Doomsday Option
1. What are doomsday options?
Zero days to expiration refers to the option contract that expires on the same day, and also refers to the option contract that is about to expire. For most US stock weekly options, the general expiration date is every Friday. For SPY and QQQ, the exchange offers daily expiration option contracts from Monday to Friday.
2. Characteristics of doomsday options
(1) Good liquidity, active transactions, and small price spreads.
(2) The time premium will decay rapidly: for an out-of-the-money option, if it remains in the out-of-the-money state at the close, the value of the option will return to zero; for an in-the-money option, its external value will quickly disappear within the day, leaving only its intrinsic value.
(3) There is a risk of being called-over when holding doomsday options. Before trading such options, you need to ensure that you have knowledge of relevant options and good positioning management.
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