Trading in short-dated options surges as S&P 500 sets back-to-back records

Trading in short-dated options has experienced a surge as the S&P 500 index approaches back-to-back record highs. Last week, options contracts with 24 hours or less until expiration saw a significant increase in trading volume, coinciding with the S&P 500’s first record close in two years. Data shared by a leading U.S. equity market strategist at Citigroup reveals that an average of 1.8 million contracts fitting this description were traded each day over the past five trading sessions. These short-dated options accounted for 49% of total trading volume during this period. The surge in trading activity aligns with a broader trend of increased options market activity, particularly in zero-days to expiration options linked to major equity indexes and exchange-traded funds.

Trading in Short-Dated Options Surges

Options Contracts with 24 Hours or Less Left Until Expiration See Spike in Trading Volume

The trading volume for short-dated options has surged in recent weeks, particularly for options contracts that have 24 hours or less until expiration. According to data from Citigroup, there has been a significant increase in trading activity in these near-expiry options, coinciding with the S&P 500’s first record close in two years. On average, 1.8 million contracts fitting this description were traded daily over the past five trading sessions. This surge in trading volume highlights the increased interest in short-dated options among market participants.

0DTE Options Account for 49% of Total Trading Volume

The surge in trading volume for short-dated options is particularly evident in the popularity of zero-days to expiration (0DTE) options. These options, which have no more than 24 hours until expiration, accounted for 49% of the total trading volume during the period analyzed. This indicates that traders are actively utilizing these near-expiry options as a trading strategy.

Monthly Contracts Attached to Major Equity Indexes, ETFs, and Stocks Expire

One of the factors driving the surge in trading volume for short-dated options is the expiration of monthly contracts that are attached to major equity indexes, exchange-traded funds (ETFs), and individual stocks. These monthly contracts typically have a set expiration date, and as that date approaches, there is often an increase in trading activity as market participants adjust their positions. The expiration of these contracts creates opportunities for traders to take advantage of short-term price movements.

Popularity of 0DTE Options Linked to S&P 500 Index and SPY ETF

The popularity of zero-days to expiration (0DTE) options can be attributed, in part, to their link to the S&P 500 index and the SPDR S&P 500 Trust (SPY) ETF. These options offer traders the ability to trade the movement of the S&P 500 index on a daily basis. As the S&P 500 index approaches record levels and experiences increased volatility, traders are attracted to the potential profits that can be made through short-dated options linked to the index. The popularity of these options has led to increased trading volume and market activity.

Daily Expirations Offer Increased Trading Opportunities

One of the key advantages of short-dated options, particularly those with daily expirations, is the increased trading opportunities they provide. With daily expirations, traders have the ability to take advantage of short-term price fluctuations and react quickly to market changes. This flexibility allows traders to enter and exit positions more efficiently, potentially increasing their profits. The popularity of daily expirations has grown steadily over the past year, with 45% of total volume in S&P 500-linked options trading on Cboe exchanges occurring in contracts on the verge of expiration in 2023.

45% of Total Volume in S&P 500-Linked Options Trading on Cboe Exchanges in 2023

According to data from Cboe, 45% of the total volume in S&P 500-linked options trading on their exchanges in 2023 occurred in contracts that were on the verge of expiration. This indicates that traders are actively utilizing short-dated options as part of their trading strategies. The high trading volume in these options suggests that traders are attracted to the potential returns and trading opportunities that these contracts offer.

S&P 500 Sets Back-to-Back Records

The surge in trading volume for short-dated options coincides with the S&P 500 setting back-to-back records. The index closed at a record high on Friday, marking its first record close in two years. This significant milestone has generated increased interest in the stock market and has likely contributed to the surge in trading volume for short-dated options. As the stock market continues to perform strongly, traders are seeking opportunities to capitalize on the market’s positive momentum.

MarketWatch Details Trading Volume Surge

According to a report from MarketWatch, there has been a significant surge in trading volume for short-dated options. The report attributes this surge to the S&P 500’s first record close in two years. The data from Citigroup shows that options contracts with 24 hours or less until expiration saw a spike in trading volume last week. On average, 1.8 million contracts fitting this description were traded daily over the past five trading sessions. Additionally, the report highlights that 0DTE options accounted for 49% of the total trading volume during this period. This surge in trading volume indicates the increased interest in short-dated options among market participants.

Citi Data Shows Spike in Trading Volume for Short-Dated Options

Data from Citigroup reveals a spike in trading volume for short-dated options. The surge in trading volume coincided with the S&P 500’s first record close in two years, indicating that market participants were actively trading these options in response to the market’s positive momentum. As the S&P 500 reached new highs, traders saw an opportunity to capitalize on short-term price movements using short-dated options. The increase in trading volume reflects the growing popularity of these options among traders.

Volume Surge Coincides with S&P 500’s First Record Close in Two Years

The surge in trading volume for short-dated options coincided with the S&P 500’s first record close in two years. As the stock market reached new highs, traders were drawn to short-dated options as a way to participate in the market’s positive momentum. The increased trading volume reflects the growing interest in these options as a trading strategy. Traders are actively utilizing short-dated options to take advantage of short-term price movements and react quickly to market changes.

Options Contracts with 24 Hours or Less Left Until Expiration See Average of 1.8 Million Contracts Traded Daily

According to data from Citigroup, options contracts with 24 hours or less left until expiration saw an average of 1.8 million contracts traded daily over the past five trading sessions. This surge in trading volume reflects the increased interest in short-dated options among traders. The potential for quick profits and the ability to react quickly to market changes have made short-dated options an attractive trading strategy for market participants.

Nominal Volumes Set New Record, Slightly Below August Peak

While the surge in trading volume for short-dated options has set new records, it is slightly below the peak reached in August. According to Stuart Kaiser, head of U.S. equity trading strategy at Citigroup, the nominal volumes are a new record but the share is slightly below the August peak of 50.4%. This indicates that while the trading volume for short-dated options is high, it is not at an all-time high. However, the continued popularity of these options suggests that traders are still finding value in short-dated options as a trading strategy.

Broad Bump in Options Market Activity

The surge in trading volume for short-dated options is part of a broader bump in options-market activity. Market participants across the board are actively trading options, reflecting the increased interest and participation in the options market. This boost in options market activity is likely driven by the positive momentum in the stock market, as well as the availability of various options products that cater to different trading strategies. As traders seek to take advantage of market opportunities, options trading has become an attractive avenue for capturing short-term price movements.

Increased Popularity of Short-Dated Options

The popularity of short-dated options, particularly zero-days to expiration (0DTE) options, has exploded since early 2022. Traders are increasingly utilizing short-dated options as part of their trading strategies. In response to this growing demand, options exchange operators have rolled out more weekly options products, providing traders with additional opportunities to trade short-dated options. The increased popularity of short-dated options reflects the desire of traders to capitalize on short-term price movements and efficiently manage risk.

Popularity Explosion of 0DTE Options Since Early 2022

The popularity explosion of zero-days to expiration (0DTE) options can be attributed to their appeal to traders seeking short-term trading opportunities. Since early 2022, these options have gained significant traction among market participants. 0DTE options offer the potential for higher returns within a short timeframe, making them attractive to traders looking to capitalize on short-term market movements. The increased popularity of these options is indicative of the evolving trading strategies employed by market participants.

Options Exchange Operators Roll Out More Weekly Options Products

In response to the increased demand for short-dated options, options exchange operators have rolled out more weekly options products. These products offer traders additional opportunities to trade short-dated options, enhancing the flexibility and choices available to market participants. By expanding the range of options products, exchange operators cater to the evolving needs and preferences of traders. The introduction of more weekly options products demonstrates the industry’s commitment to meeting the demand for short-dated options.

Daily Expirations Offer More Trading Opportunities

One of the main attractions of short-dated options is the availability of daily expirations. Daily expirations provide traders with more frequent trading opportunities, as options contracts can be traded on a daily basis. This increased frequency allows traders to take advantage of short-term price movements and react quickly to market changes. The ability to trade on a daily basis gives traders more flexibility and enhances their ability to capture potential profits. The popularity of daily expirations reflects the desire of traders to actively participate in the market and seize trading opportunities.

Cboe Data Shows 45% of Total S&P 500-Linked Options Volume in Contracts on Verge of Expiration in 2023

According to data from Cboe, 45% of the total volume in S&P 500-linked options trading on their exchanges in 2023 occurred in contracts on the verge of expiration. This indicates a significant portion of trading activity is focused on short-dated options. Traders are actively utilizing short-dated options as part of their trading strategies, capitalizing on the potential returns and opportunities these options offer. The high trading volume in these contracts demonstrates the increased interest and participation in short-dated options trading.

Implications for Stock Market

The surge in trading volume for short-dated options has implications for the stock market as a whole. The increased interest in short-dated options suggests that market participants have a higher appetite for risk and are seeking ways to capitalize on short-term market movements. This heightened activity in short-dated options reflects a potentially increasing divide between market winners and losers, as traders actively seek opportunities to profit from short-term price movements. As the stock market marches towards new highs, the use of short-dated options as a trading strategy has the potential to impact overall market dynamics.

Risky Option Bets Have Wall Street on Edge

The surge in trading volume for short-dated options, which are often considered risky option bets, has put Wall Street on edge. These options carry a higher level of risk compared to longer-dated options, as the potential for large price swings within a short period of time is increased. The popularity of these risky option bets reflects the willingness of traders to take on additional risk in the pursuit of higher potential returns. However, the increased interest in risky option bets also raises concerns about the overall stability and health of the market.

Increasing Divide Between Market Winners and Losers

The surge in trading volume for short-dated options highlights an increasing divide between market winners and losers. Traders who are successfully capitalizing on short-term market movements through short-dated options are considered winners, while those who are unable to navigate the volatility and properly manage risk are considered losers. This growing divide in the market underscores the importance of having a well-defined trading strategy and the ability to react quickly to changing market conditions. As the popularity of short-dated options continues to rise, the divide between winners and losers may become more pronounced.

S&P 500 Marches Towards 5,000

The S&P 500 index has been marching towards the 5,000 mark, setting back-to-back records along the way. The surge in trading volume for short-dated options coincides with this upward trajectory of the index. As the stock market continues to perform strongly, the S&P 500’s march towards 5,000 has generated significant interest and excitement among market participants. Traders are actively seeking opportunities to capitalize on this positive momentum, resulting in increased trading volume for short-dated options.

Earnings Needed for Market to Sustain Growth

While the stock market has experienced back-to-back records, sustained growth will require strong earnings performance from companies. The positive momentum in the market needs to be supported by solid earnings results, which will serve as a fundamental foundation for continued market growth. Traders and investors will closely monitor earnings reports, as they can have a significant impact on stock prices and overall market sentiment. As the market reaches new highs, the focus on earnings becomes even more crucial for sustaining market growth.

S&P 500 Closes in on First Record Close in Two Years

The S&P 500 index is closing in on its first record close in two years, signaling a significant milestone in the market. The surge in trading volume for short-dated options has coincided with the index’s upward movement and record-breaking performance. Traders are actively participating in the market, seeking to capitalize on the potential returns and opportunities that the S&P 500’s performance presents. The closing in on a record close further fuels the excitement and interest in the market.

Index Reaches Fresh Record Close on Monday

The S&P 500 index reached a fresh record close on Monday, continuing its upward trajectory and solidifying its position as a top-performing index. The surge in trading volume for short-dated options has likely contributed to the S&P 500’s record-breaking performance. Traders are actively engaged in the market, taking advantage of short-term price movements and actively participating in the market’s positive momentum. The fresh record close on Monday reflects the continued strength and resilience of the stock market.

Dow Flirts with First Close Above 38,000

The Dow index flirted with its first close above 38,000, further demonstrating the overall strength and positive momentum in the stock market. As the S&P 500 and the Dow both reach new highs, traders are actively engaged in the market, seeking opportunities to capitalize on short-term price movements. The surge in trading volume for short-dated options has likely contributed to the Dow’s strong performance. The potential for the index to close above 38,000 reflects the continued growth and positive sentiment in the market.

Nasdaq Composite Gains 0.3% to 15,359

The Nasdaq Composite index gained 0.3% to reach a level of 15,359 on Monday. The surge in trading volume for short-dated options has likely contributed to the Nasdaq’s solid performance. Traders are actively participating in the market, seeking opportunities to capitalize on short-term price movements. The increase in trading volume for short-dated options reflects the increased interest and participation in the options market. As the stock market continues to perform strongly, traders are likely to continue seeking opportunities in short-dated options.

Expiration of Monthly Contracts Attached to Major Equity Indexes, ETFs, and Stocks

The expiration of monthly contracts attached to major equity indexes, ETFs, and individual stocks is one of the factors driving the surge in trading volume for short-dated options. These monthly contracts have a set expiration date, and market participants often adjust their positions as that date approaches. The expiration of these contracts creates opportunities for traders to take advantage of short-term price movements and adjust their strategies accordingly. The expiration of monthly contracts contributes to the increased trading activity in short-dated options.

Introduction of More Weekly Options Products

The surge in trading volume for short-dated options is also driven by the introduction of more weekly options products. Options exchange operators have recognized the growing demand for short-dated options and have rolled out additional products to cater to market participants’ preferences. The availability of more weekly options products provides traders with additional opportunities to trade short-dated options and further enhances the flexibility and choices available to them. The introduction of these products has contributed to the increased popularity and trading volume of short-dated options.

Higher Popularity of Daily Expirations

The higher popularity of short-dated options with daily expirations is a key driver of the surge in trading volume. Market participants are attracted to the increased trading opportunities and flexibility that daily expirations offer. With daily expirations, traders can quickly react to market changes and take advantage of short-term price movements. The ability to trade on a daily basis gives traders more control over their positions and allows them to capture potential profits more efficiently. The higher popularity of daily expirations reflects the evolving needs and preferences of market participants.

Increased Interest in Risky Option Bets

The surge in trading volume for short-dated options indicates an increased interest in risky option bets. Short-dated options are often considered riskier compared to longer-dated options due to their shorter time frame and potential for large price swings. Traders who are willing to take on additional risk may be attracted to these options as they offer the potential for higher returns within a short period of time. The increased interest in risky option bets reflects traders’ appetite for risk and their willingness to pursue higher potential profits.

Positive Momentum in Stock Market

The surge in trading volume for short-dated options can be attributed, in part, to the positive momentum in the stock market. As the stock market continues to perform strongly and reach new highs, traders are actively seeking opportunities to participate in the market’s positive momentum. Short-dated options offer traders the ability to capitalize on short-term price movements and actively engage in the stock market. The positive momentum in the stock market has generated increased interest and excitement among market participants, contributing to the surge in trading volume for short-dated options.

Impact on Trading Strategy

The surge in trading volume for short-dated options has a significant impact on trading strategies. Traders now have increased trading opportunities with daily expirations, allowing them to take advantage of short-term price movements and react quickly to market changes. The availability of more trading opportunities enhances flexibility and provides traders with the ability to adjust their positions efficiently. Short-dated options also offer the potential for higher returns within a shorter timeframe, making them an attractive option for traders looking to maximize profits. The increased trading volume highlights the importance of incorporating short-dated options into trading strategies.

Increased Trading Opportunities with Daily Expirations

The surge in trading volume for short-dated options provides traders with increased trading opportunities, particularly with daily expirations. Daily expirations allow traders to take advantage of short-term price movements, as options contracts can be traded on a daily basis. This increased frequency of trading opportunities enhances the ability of traders to react quickly to market changes and efficiently manage their positions. Traders can actively participate in the market and seize trading opportunities, potentially leading to higher profits.

More Flexibility in Trading Risky Option Bets

The surge in trading volume for short-dated options offers traders more flexibility in trading risky option bets. Short-dated options are often considered riskier due to their shorter time frame and potential for large price swings. However, with increased trading volume and more opportunities to trade short-dated options, traders have the flexibility to manage their risk more effectively. Traders can adjust their positions and exit trades quickly, allowing for better risk management and potentially reducing the impact of potential losses. The increased flexibility in trading risky option bets allows traders to navigate the market more efficiently.

Short-Dated Options Provide Higher Potential Returns

The surge in trading volume for short-dated options indicates the potential for higher returns compared to longer-dated options. Short-dated options offer the opportunity to capitalize on short-term price movements, potentially leading to quick profits. Traders who successfully navigate short-dated options can benefit from the higher potential returns that these options provide. However, it is important to note that short-dated options also carry a higher level of risk, as the potential for large price swings is increased. Traders should carefully consider the risk-reward trade-off before engaging in short-dated options trading.

Traders Can React Quickly to Market Changes

The surge in trading volume for short-dated options highlights the ability of traders to react quickly to market changes. With short-dated options, traders can adjust their positions and exit trades efficiently, allowing them to adapt to changing market conditions. The increased trading volume reflects the active participation of traders in the market and their ability to seize trading opportunities. The ability to react quickly to market changes is crucial in capitalizing on short-term price movements and maximizing profits. Traders who can effectively react to market changes have a competitive advantage in the market.

MarketWatch Analysis of Trading Volume Surge

MarketWatch has analyzed the surge in trading volume for short-dated options and its implications for the market. The analysis indicates that the surge in trading volume coincided with the S&P 500’s first record close in two years. This suggests that the positive momentum in the stock market has contributed to the increased interest in short-dated options. Traders are actively participating in the market, seeking opportunities to capitalize on short-term price movements. The surge in trading volume reflects the growing popularity of short-dated options as a trading strategy.

Spike in Trading Volume Coincides with S&P 500’s First Record Close in Two Years

The surge in trading volume for short-dated options has coincided with the S&P 500’s first record close in two years. This significant milestone in the stock market has generated increased interest and excitement among market participants. Traders are actively engaged in the market, seeking opportunities to profit from short-term price movements. The surge in trading volume indicates that traders are capitalizing on the market’s positive momentum and actively participating in the stock market.

Short-Dated Options Gain Popularity as Market Hits New Highs

The surge in trading volume for short-dated options reflects the growing popularity of these options as the stock market reaches new highs. Traders are attracted to the potential profits and trading opportunities that short-dated options offer. As the stock market continues to perform strongly, market participants are actively seeking ways to participate in the market’s positive momentum. The surge in trading volume indicates that short-dated options are becoming an increasingly popular strategy among traders.

Increased Options-Market Activity Seen Across the Board

The surge in trading volume for short-dated options is part of a broader increase in options-market activity. Market participants across the board are actively trading options, reflecting the increased interest and participation in the options market. The surge in trading volume for short-dated options is a reflection of the overall heightened market activity. Traders are actively utilizing short-dated options as part of their trading strategies, taking advantage of the potential returns and opportunities these options offer. The increased options-market activity highlights the growing interest in options trading as a viable investment strategy.