Odd Lots What the Dramatic Boom in Zero-Day Options Means for Stocks
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Mar 17, 2023 
Charlie McElligott, a strategist at Nomura, dives into the surge of zero-day options in trading. He discusses how these short-lived contracts are reshaping market dynamics, attracting both institutional and retail traders. The conversation highlights the intense debate surrounding their potential risks, including the fear of a repeat of the 2018 'Volmageddon.' McElligott explains the driving factors behind their popularity and the complex interplay between market participants, shedding light on how these trends could impact overall market stability.
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Volmageddon of 2018
- In 2018, VIX-linked ETNs collapsed, impacting the broader market.
- Retail investors, active on platforms like Reddit's r/TradeXIV, were heavily involved.
Persistent 0DTE Demand
- Zero-day-to-expiry (0DTE) options trading remains high despite reduced speculation in other areas.
- This challenges the narrative of 0DTE options being driven solely by retail gamblers.
0DTE Options: Purpose and Demand
- 0DTE options offer leveraged payouts, attracting investors seeking higher returns.
- Officially, exchanges claim these options provide tools for managing risk and liquidity.