The Rise of Zero-Day Options: What Traders Need to Know

If you’re a trader on trend, then it’s time to pay attention to the zero-day options (0DTE) frenzy that is about to sweep through popular stocks like Nvidia (NVDA) and Tesla (TSLA). Nasdaq has filed for approval from the SEC to list options that expire on Mondays and Wednesdays, which will roll out new opportunities for traders seeking to capitalize on quick market movements.

What’s Driving the 0DTE Craze?

The growth of trading in 0DTE options has been explosive. What was once limited to major indices like the S&P 500 is now paving the way for smart and amateur investors alike to capitalize on hourly or daily price action. With most individual stock options expiring only on Fridays, this new flexibility could draw traders keen on quick entries and exits.

According to Scott Bauer, CEO of Prosper Trading Academy and a seasoned options trader, the SEC’s potential approval could be a game changer. Currently, only select ETFs and index options are available daily, but that could soon expand to the likes of major companies including Nvidia, Tesla, Apple (AAPL), Microsoft (MSFT), and others.

The allure of 0DTE contracts lies in their inherent volatility. Traders have the chance to realize substantial gains over a very short time frame — if they can time their trades right. Indeed, a Cboe analyst noted that an estimated 50% to 60% of trading volume in S&P 500 0DTE contracts involves retail investors, showcasing the democratization of options trading.

A Record-Breaking Year for Options

The year 2024 marked another milestone as over 12 billion options contracts were traded, breaking previous records. Experts are projecting 2025 to surpass this number, further propelled by the potential launch of more 0DTE options.

This spike in options trading interests further indicates a growing trend where individual investors are not just participating but actively shaping the market. The advancements in electronic trading platforms have allowed average investors to gain a foothold in options trading, fueling the current paradigm shift.

Proposed Changes: What to Expect

According to Nasdaq’s proposal, which could be approved within the next 240 days, the exchange aims to add Monday and Wednesday expiries for a select range of equities, excluding days leading to earnings reports. This careful calibration is designed to mitigate risks associated with erratic stock price movements that could occur post-market.

Participants can expect the following stocks to be eligible for early-week trading:

Nvidia (NVDA)
Tesla (TSLA)
Apple (AAPL)
Microsoft (MSFT)
Broadcom (AVGO)
Alphabet (GOOGL)
Meta (META)
Amazon (AMZN)
Financial Select Sector SPDR Fund (XLF)

Be Cautious: Understand the Risks

However, while these options may appear to offer a “lottery ticket” style allure, traders must practice caution. 0DTE contracts often expire worthless, unless you’re apt at timing your trades with market fluctuations. As JJ Kinahan, CEO of IG North America (parent company of tastytrade) points out, it’s vital for investors to adopt a strategic approach and not treat options as mere gambles.

Many sophisticated traders utilize 0DTE options as part of hedging strategies, using multiple contracts to manage risk. This emphasizes the need for education around the complexities of exercising and assignment risks associated with options trading.

The Takeaway: Are You Ready for This Trend?

The potential launch of Monday and Wednesday 0DTE options has exciting implications ahead for traders focused on momentum and quick trades. As this trend unfolds, savvy traders will be poised to seize opportunities while assessing and managing risks effectively.

Now is the time to sharpen your trading skills and strategize around the implications of these upcoming changes. As the options landscape evolves, those prepared with insight and tactics will stand to benefit the most.

Stay tuned, traders! This could be your next big opportunity!

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The Exciting Rise of Zero-Day Options: How Traders Can Ride the Wave to Profit!