(Bloomberg) — Zero-day options on the S&P 500 index surpassed all other expiries combined in the fourth quarter for the first time in history, the latest milestone marking the growing dominance of short-term contracts.
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Same-day options trading averaged more than 1.5 million contracts per day in the final three months of 2024, representing 51% of total S&P 500 options volume, according to data from Cboe Global Markets. Inc. compiled by Asym 500, triple. the amount from the same period in 2021. At that time, the so-called 0DTE volume was less than half of the later-dated options.
“It’s a combination of higher intraday volatility, more macro catalysts like the US election, as well as the continued adoption of index options trading by retail investors to manage and trade risks,” said Mandy Xu, head of market intelligence at derived from Cboe.
The change underscores the meteoric growth of daily expiry S&P 500 Index options trading, which Cboe made available in the second quarter of 2022. The instrument gained a foothold during the Covid pandemic among retail investors. Now, the massive volumes are a sign of acceptance among institutional traders as well, who use derivatives to hedge (or bet) against sudden moves in the US benchmark around everything from economic events to interest rate decisions. of the Federal Reserve and major companies. earnings.
“Daily options expirations have been steadily gaining acceptance, especially since they are starting to have enough track record to test systematic strategies,” said Rocky Fishman, founder of Asym 500. “The sudden spikes in volatility on August 5 and August 18 December could only have helped things move forward.”
The contracts have been as controversial as they have been popular, raising concerns among some market participants that large volumes could exacerbate sudden market moves as traders buy and sell underlying instruments to balance their positions. This has been rejected by Cboe and others, who point out that investors’ trades are balanced between long and short positions, making large moves less likely to occur as a result of so-called gamma hedging.
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