Options Boot Camp 375: 0dte Options and the Dangers of Contra-Exercise

This episode of Options Boot Camp dives into one of the most significant shifts in the equity markets: the arrival of 0DTE (Zero Days to Expiration) options for single stocks like Nvidia, Tesla, and Apple. While the excitement is high, hosts Mark Longo and Dan Passarelli highlight a critical technical risk that many retail traders overlook—Contra-Exercise.

Episode Summary

The "0DTE era" has officially expanded beyond cash-settled indices like the SPX. With single-name equity options now listing for Mondays, Wednesdays, and Fridays, traders face a new logistical hurdle: physical settlement. Unlike cash-settled indices, equity options result in the delivery of actual stock, making the after-hours window a potential minefield for "pin risk" and unexpected assignments.

Key Discussion Points:

• The 0DTE Expansion: Why names like IBIT, NVDA, and TSLA are joining the zero-day fray and what it means for market volatility.

• Understanding Contra-Exercise: The mechanics of the "Do Not Exercise" (DNE) order and how to force the exercise of out-of-the-money options.

• The After-Hours Window: Why the 4:00 PM ET close isn't the end of your risk, and how news after the bell can trigger "ghost" assignments.

• Broker Deadlines: A breakdown of how different brokers handle the cutoff times for contra-instructions.

• Risk Management: Why the "best case scenario" is almost always closing your position before the closing bell.

Go to tastytrade.com/podcasts and see why Investopedia named tastytrade the best broker for options in 2024. Genius loves company.