(Bloomberg) — Zero-day options on the S&P 500 Index surpassed all other periods combined for the first time in the fourth quarter, the latest milestone to reflect the growing dominance of short-term contracts.
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Asym 500 Compiled by Cboe Global Markets Inc. Trading in options expiring on the same day averaged more than 1.5 million contracts per day in the final three months of 2024, accounting for 51% of overall S&P 500 index options volume, three times the same period in 2021, according to the data. amount of At the time, so-called 0DTE volume was less than half that of later-dated options.
“This is a combination of high intraday volatility, other macro catalysts like the US election, as well as the continued adoption of index options trading by retail investors to manage and trade risk,” said Mandy Xu, Cboe’s head of derivatives market intelligence.
The shift reflects a sharp increase in trading in S&P 500 index options with daily expirations, which Cboe made available in the second quarter of 2022. The instrument gained a foothold during the Covid pandemic with retail investors. Now, there’s also a sign of acceptance among a large number of institutional traders, who use derivatives to make bets — or bets — on unexpected moves in the U.S. benchmark around everything from economic events to the Federal Reserve’s interest rate decisions to major corporates. use the earning
“Daily options are becoming more widely accepted, especially since they’ve started to have enough history to backtest systematic strategies,” said Rocky Fishman, founder of Asim 500. Things have helped. “
The contracts have been as controversial as they have been popular, raising concerns among some market participants that large volumes could suddenly fuel market moves as dealers buy and sell underlying instruments to balance their positions. This has been contradicted by the Cboe and others, who point out that investor trading is balanced between long and short positions, making any big move less likely as a result of so-called gamma hedging.
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