Hope at a Reasonable Price: Customer Use of Limit Orders in the 0DTE Market¶
Bibliographic record. Follow the original-source link for the publication.
| Field | Value |
|---|---|
| Primary domain | Microstructure |
| Other domains | Execution Costs |
| Methods | — |
| Facets | Horizon 0Dte |
| Authors | Lei Fu, Su Li, David K. Musto, Neil D. Pearson |
| Published | 2025-04-17 |
| Source | SEC DERA Working Papers |
| Identifiers | sec-full-text:https://www.sec.gov/files/dera-hope-reasonable-prc-2503.pdf |
| URL | Open original source |
Editorial synthesis¶
Why it matters¶
The study connects event sequencing, passive customer orders and non-execution risk. Displayed spreads alone do not measure customers' execution costs, and cheaper execution does not establish profitable strategies. (full_text:S66, full_text:S68, full_text:S95, full_text:S177, description:S5)
Main author claims¶
- The authors report assigning 99.9% of trades through resequencing. Quote codes then identify customer market-turning and pick-off orders, rather than verified retail accounts. (
full_text:S51,full_text:S54,full_text:S95,full_text:S177,full_text:S198,full_text:S202) - The authors report: For sub-$3 call purchases with two-tick spreads, Table 5 reports fill rates of 50.2%/62.8% and quote-unit net costs of \(0.028/\)0.021 versus $0.050 immediately marketable, assuming a one-second fallback. (
full_text:S68,full_text:S74,full_text:S426)
Data, method, or discussion scope¶
The main sample covers SPXW 0DTE from July 2020 through September 2023, split in April 2022. SEC posted this working paper on April 17, 2025; March dates inside the PDF identify the manuscript, not that posting. (full_text:S56, full_text:S57, full_text:S58, full_text:S83, description:S1, description:S6)
Main limitations¶
Order tracking assumes rare customer replacement after cancellation; size only suggests retail participation, and PO submission times are unavailable. Results depend on the fallback rule and historical SPXW setting, not account-level profitability. Not replicated; DERA papers are not SEC policy. (full_text:S68, full_text:S87, full_text:S95, full_text:S187, full_text:S188, description:S7)