Nasdaq recently unveiled options contracts with a Wednesday expiration date that allows traders to place trades on non-equity instruments, such as the United States Oil Fund (USO). The proportion of the options market involved in the trading of soon-to-expire options has experienced a surge over the past few years. This spike in short-term options trading has evoked differing views on Wall Street, with some cautioning of an increased degree of volatility.
An increasing number of hedge funds and retail traders have been drawn to short-dated options, with the trend now extending to other asset classes. Last week, Nasdaq launched two-week, Wednesday-expiring options contracts for USO, UNG, GLD, SLV, and TLT. The most commonly traded stock indexes have already established options trading with contracts expiring on every day of the week, providing options traders with "zero-day to expiration" or "0DTE" trading opportunities. The Securities and Exchange Commission approved the new listings on November 13th.Recently, options trading in contracts expiring in less than a day has risen significantly as a percentage of the options market, as noted in Cboe data. A growing number of traders are looking for strategies to take advantage of events happening on a certain day. As an example, the Wednesday expirations correspond with Federal Reserve policy statements released eight times a year.JPMorgan strategist Marko Kolanovic has warned about the possible risks associated with the surge in short-term options trading, however not everyone is concerned. Randy Frederick, managing director of trading and derivatives for the Schwab Center for Financial Research, believes "0DTE has always been a risk day," but the risk has been spread out over a longer period of time making it less risky. Lastly, Nasdaq expects the introduction of Wednesday options to not cause "market disruptions".
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