Zero-Day Options Fuel Speculation and Risks While Comprising Half of S&P 500 Options

Zero-day options expire the same day they are issued and now make up 50% of S&P 500 options activity.
They are a high-risk, high-reward strategy that became popular during the meme stock craze.
While risky for individual investors, the bigger risk is they could exacerbate volatility if use grows.
New ETFs utilizing 0DTE options could pose risks if assets under management grow significantly.
Institutions use them mainly to hedge risks, but individuals are more speculative.

businessinsider.com

Relevant topic timeline:

8/22/2023

Wall Street blamed zero-day option traders for a sudden stock-market selloff. But a BofA team says they got it wrong.

A team of equity-derivative strategists at Bank of America argues that the influence of rising zero-day option volumes has been exaggerated and that other factors, such as rising Treasury yields and trading by systematic quant funds, were likely the drivers of a sharp move lower in the S&P 500.

9/14/2023

Zero-Day Options Trading Skyrockets as Retail and Institutions Flock to High-Risk, High-Reward Bets

Zero-day to expiry options, or "0DTEs," have become popular among retail and institutional traders, with activity in the market hitting record highs, accounting for a significant portion of average daily trading volume in options tied to the S&P 500; however, there are concerns about the potential risks and impact on stock-market stability that these options pose.

9/15/2023

Record $3.4 Trillion in Stock Options Expiring Friday Could Mean Volatility for Stocks and Bitcoin

Stock options worth $3.4 trillion are set to expire on Friday, potentially leading to increased volatility and price declines in both the S&P 500 and Bitcoin, with September historically being a negative month for these assets. There is also a possibility of a surprise interest rate hike by the Federal Reserve, which could impact risk assets.

9/24/2023

Stocks and Options: Balancing Risk and Reward for Beginner Investors

Options trading and stock trading have distinct differences, as stocks offer steady long-term growth and lower risk, while options provide potential for substantial gains but also carry significant risk. It is important for investors to understand these differences and make informed decisions based on their investing needs and goals.

9/29/2023

Bitcoin Price Expected to Remain Steady Despite $3B Options Expiry

Bitcoin options contracts worth $3 billion are set to expire today, but experts suggest that it is unlikely to significantly impact the price of Bitcoin, as historical data shows that options expiries in crypto do not affect prices much.

10/12/2023

Major U.S. Banks Brace for Volatile Earnings Season as Investors Flee Bank ETFs

Options traders are expecting larger post-earnings stock price swings for some U.S. banks, including JPMorgan, Wells Fargo, and Citigroup, despite a decline in volatility in broader markets.

10/27/2023

Over $4.5 Billion in Bitcoin and Ethereum Options Expiring Today After Volatile Week for Crypto Prices

Over $4.5 billion worth of Bitcoin and Ethereum options contracts are set to expire today, potentially causing volatility in the market as both assets have recently experienced a decline in price.

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Posted 9/30/2023, 12:30:00 PM