Zero-Day Options Boom Will Only Grow Even As Some Investors Fear Disaster

Two years after Wall Street’s love affair with fast-twitch stock options began, Bloomberg’s latest Markets Live Pulse survey suggests the unprecedented boom still has room to run — even as almost half of respondents fear an eventual blowup.

With the notional value of zero-days-to-expiration contracts tied to the S&P 500 hitting roughly $862 billion in April, almost 90% of 300 MLIV Pulse respondents said they expect the growth to continue. The twist? They're about evenly split on whether it will grow steadily or end in calamity.

zero-day options

Equity derivatives with less than 24 hours to expiration, known as 0DTE, have become one of Wall Street’s most popular trades as investors big and small seek to navigate uncertainty over the economy and central bank policy. Trading in 0DTE made up 45% of the total options volume for the S&P 500 last year, about double the level from before the products became widely available in the second quarter of 2022.

“The exchanges are making money hand over fist by allowing daily options. As you’ve seen, the volume has gone up because more and more people have access to it,” said Phil Pecsok, chief investment officer of Anacapa Advisors. “They’re only going to become more prevalent.”

The scale of the boom has stirred controversy. There are concerns the activity in ultra-short-dated options may be affecting stock volatility, while research has suggested that retail investors using them mostly lose money.