EXCLUSIVE: Half Of SPX Options Volume Now In Zero-Day Trades, Reveals Cboe Executive

The field of options trading is rapidly transforming, as zero-day-to-expiry (0DTE) options now comprise nearly half of the SPX options volume.

“Volumes have increased about three times in the last seven years, from 4 billion contracts in 2017 to about 11 billion last year,” Vince Cicco, Cboe Global Markets‘ director of derivatives sales in the U.S., highlighted these changes during a Tuesday Benzinga virtual event.

0DTE options trading has expanded about 60% annually since 2016, he added. This growth is driven by more expirations, enhanced technology, and the removal of trading fees, making these options more accessible to a wider range of traders.

Understanding Benefits And Risks

• Benefits: 0DTE options allow traders to make quick, tactical moves in the market. These options enable traders to hedge positions or speculate on short-term market movements without a long-term commitment. The liquidity and lower premiums associated with 0DTE options make them an attractive choice for many market participants. “There are a lot of options symbols that do not trade that many contracts in a single day,” Cicco noted, emphasizing the high volume of trades in this segment.

• Risks: The rapid decay in value and the potential for high leverage means that traders must be precise in their predictions and prepared for quick adjustments. “If you’re long an option and it’s not moving, it decays really fast at the end of the day,” Cicco warned. The session covered various risk management strategies, including using complex trading methods like iron condors and vertical spreads.

Impact On Retail And Institutional Trading

The rise of 0DTE options has dramatically affected retail and institutional trading dynamics. Retail traders, in particular, have embraced these instruments, driven by the opportunity for quick returns and the ability to trade tactically around specific market events.

“Retail participation has really been a driving force behind the surge in 0DTE options,” Cicco said.

Institutional traders also adapt to this trend, incorporating 0DTE options into their strategies to enhance portfolio performance and manage risk more effectively. The seminar underscored that while 0DTE options offer major opportunities, they also require a deep understanding of the market and careful risk management.

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