Going Long or Staying Put?

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Joining The Options Trading Boom in 2023

There has been a surge in options trading since the pandemic, with more investors using the added flexibility from the tool and the diversity of trades available to profit from the wild market swings seen since that world-changing black swan event.

Even now, with the pandemic firmly in the rearview mirror, options trading remains robust, suggesting the trend may go on deeper into the decade.

We Like Our Options

Options trades from institutional investors increasingly have the momentum to move markets.

For instance, the JPMorgan Hedged Equity Fund – which manages nearly $15 billion in assets – resets its hedges at the end of each quarter, which can exacerbate daily volatility on the day of the reset.

In particular, the rise of ultra-short-term contracts, known as “0DTE” (or “zero-day to expiry” options), has taken on an among day traders looking to price in before the close of trade, especially those tracking market sentiment, like S&P 500 0DTEs.

All options ensure the right to buy or sell equities at a certain price at a given time, but 0DTEs expire the same day they are purchased, enabling profits from intraday price moves.

These plays can be particularly lucrative when timed for Fed days or monthly inflation data releases, which usually swing the market.

According to OptionMetrics data, the daily volume of 0DTEs trades almost quadrupled between the start of 2020 and late last year.

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