Zero-Day Options

Zero-Day Options, or options with 0 days to expiration (0DTE), are option contracts that only exist for a single trading session and expire on the same day they are traded. A 0DTE option can be a longer-term option that has reached the last day of its lifecycle, or a specific option that’s listed only for a single day.
In theory, 0DTE options offer big investors a way to hedge short-term risk in a very volatile marketplace. But in practice, they can be complex and risky. The boom in zero-day options since 2022 has sparked debate on Wall Street about whether 0DTE options have the potential to influence, or even destabilize, American equities. They have been blamed for fueling stock volatility.
Zero-day options are a way of taking a short-term position on the direction of an index, stock or exchange-traded fund. Because the expiration comes at the end of the day, traders must decide quickly whether to fulfill the options contract or lose their initial outlay. 0DTE options surged in popularity in 2022 after exchanges such as Cboe Global Markets expanded S&P 500 options expirations to cover all five weekdays, up from three previously. The additional offerings meant traders could further incorporate 0DTE into their daily trading routines and speculate on market-moving events on any day of the week. 
Some potential reasons for trading 0DTE options include: 0DTEs expire just after the market close, thus limiting overnight market risk; 0DTE options can be less expensive than options with more days to expiration (premiums can be in cents for 0DTEs versus dollars for longer-DTE options); The 0DTE market tends to have tight spreads, which can help limit trading costs.
The Cboe Options Exchange introduced weekly SPX options that expire on Fridays in 2005. By 2022, Cboe had introduced weekly options with expirations on every trading day of the week. Data released by the Cboe Options Exchange in the spring of 2023 estimated that approximately 46% of the total trading volume in the equities options market consists of contracts with less than 5 days until expiration (aka 5DTE).
Cboe's expansion of its suite of S&P 500 options led to a boom in 0DTE options. According to the Financial Industry Regulatory Authority (FINRA), between January 2022 and 2023, the number of opening 0DTE options positions increased approximately 60%, and for retail customers, the number of opening 0DTE options positions during that period jumped to about 75%. 
All options can be traded as 0DTE options, but only a few securities offer options which expire every day. As of the end of 2022, Cboe offers expiring contracts on every trading day for the following securities: Nasdaq 100 Index (NDX); S&P 500 Index (SPX); Mini-SPX Index (XSP); SPDR S&P 500 ETF Trust (SPY); and Invesco Nasdaq 100 Trust (QQQ).
On December 20, 2023, there was speculation about whether Zero-Day Options were responsible for a sharp drop in the S&P 500 index. 
As of June 2024, 0DTE options made up half of the S&P 500’s total options trading. That spurred strategists at JPMorgan Chase & Co. to warn that they might pose a threat to the broader equity landscape. The OCC in June proposed new margin requirements on Wall Street firms, looking to harden rules on intraday margins at brokers and dealers in the event their risk exposures breach certain thresholds amid the trading "frenzy" in 0DTE options, Bloomberg reported.
==Education==
In April of 2024, Cboe published a paper titled "Debunking Options Myths," aiming to dispel misconceptions surrounding options trading. Cboe highlights the history and evolution of options trading, particularly focusing on the rise of same-day expiring options (0DTE options) and their benefits for investors. Additionally, the article discusses the role of short-dated options in portfolio management, income generation, and speculation, while emphasizing the importance of education and informed decision-making in options trading. 
== References ==
Category:Options