The Nasdaq MarketSite is seen in New York City on October 12, 2022. The Nasdaq Composite Index yesterday hit its lowest level since July, slipping into a bear market for the second time this year. (Photo by Michael M. Santiago/Getty Images)
Michael M. Santiago | getty images
The rapid growth in short-dated options that have become popular among hedge funds and retail traders is now spreading beyond stocks to other asset classes.
Nasdaq last week launched new two-week options contracts that expire on Wednesday based on the following exchange-traded products:
The short-term options market is already well developed for contracts based on stock index products. SPDR S&P 500 ETF Trust (SPY) and Nasdaq 100-tracking Invesco QQQ Trust (QQQ), While options contracts historically expire on Fridays, the most popular stock indexes now have contracts that expire every day of the week. This creates the ability for “zero-day-to-expiry,” or “0DTE,” options trading.
The new listing brings the new asset classes one step closer to that reality.
“The exchange believes there is general investor demand for alternative expirations, including Wednesday expirations, as evidenced by the relatively significant percentage of volume in Wednesday SPY, QQQ and IWM expirations,” Nasdaq said in its statement. rule change proposal In June. Securities and Exchange Commission approved products on 13 november,
The new funds come at a time when trading in expiring options has expanded dramatically as share of the options market in recent years. The percentage of options trading on the S&P 500 in contracts expiring in less than a day has risen from 8% in 2018 to at least 42% in every month so far this year, according to Cboe data.
This popularity may be due to traders looking for ways to bet on the outcome of events occurring on a particular day. For example, Wednesday’s expiring contracts will coincide with new policy statements from the Federal Reserve eight times a year.
The rise of short-term options trading has divided opinion on Wall Street. For example, JPMorgan strategist Marko Kolanovic has warned that the frenzy could create a “Volmageddon” type event, but not everyone is worried that the increased trading could pose a risk to the markets. . The term refers to a day of extreme volatility in February 2018 that destroyed short-term strategies.
“In my view, 0DTE has always been a riskier day, but now we’ve spread that risk out over an entire month. So to me that makes it even less risky. And if you have a handful of people who What they want to do is “speculate on what the market might do on any given day, from when it will open to when it will close,” Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, told CNBC. is not a big deal.”
Nasdaq said in its rule change proposal that it does not expect any “market disruption” from Wednesday’s introduction of the new options.
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