Zero-Day Options

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Zero-Day Options, or options with 0 days to expiration (0DTE) options, 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.

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.[1]

Data released by the Cboe Options Exchange estimate that approximately 46% of the total trading volume in the equities options market currently consists of contracts with less than 5 days until expiration (aka 5DTE).[2]