Zero-day-to-expiry options, also known as #0dte, have gained popularity in the U.S. market since 2022, driving record trading volumes in the options market. Now, Wall Street is looking to further fuel the craze for end-of-day options.
Currently, end-of-day options are primarily limited to options linked to indices such as the S&P 500 or the Nasdaq 100. These options allow investors to bet on whether a stock market index will rise or fall before the end of the day.
The next breakthrough Wall Street is seeking could be individual stock end-of-day options based on stocks like Tesla or Nvidia. At present, individual stock options expire once a week, usually on Fridays. To introduce end-of-day options to individual stocks, exchanges would need to add new expiration dates from Monday to Thursday.
Reports indicate that over the past year, several heavyweight Wall Street firms have discussed the pros and cons of launching individual stock end-of-day options in closed-door industry meetings:
Brokerages such as Robinhood, Schwab, Tastytrade, and E*Trade, owned by Morgan Stanley, have called for a cautious approach, fearing strong reactions from clients if their options trading fails.
Other companies—including major options market makers like Susquehanna International Group and Nasdaq—are actively promoting the introduction of daily expiration mechanisms to individual stocks. Market makers and exchanges are expected to reap more benefits from the further development of end-of-day options.
Individual stock end-of-day options could be launched as early as late 2025. Some advocates suggest a limited release initially, targeting only a few stocks, to allow investors time to adjust.
Executives in the Wall Street financial industry hope that the introduction of individual stock options will trigger a trading frenzy. However, this will also bring new risks to investors, especially on days when company earnings reports are released. Currently, individual stock options expire on Fridays, and few companies release earnings reports on that day, limiting the impact of earnings on end-of-day options. In the future, once individual stock end-of-day options are launched, more options will expire on the same day when after-hours price swings are significant.
Index options are settled in cash, with funds flowing into or out of investors' brokerage accounts upon expiration. In contrast, individual stock options are settled through the buying and selling of shares, introducing potential risks for investors.
For example, an investor holding one contract of Nvidia call options with a strike price of $105. If the closing price of the Nvidia option on the expiration date is $106.5, the investor's brokerage account will see a cash reduction of $10,500, and the number of Nvidia shares will increase by 100. The exercise of this call option is profitable because the stock price has exceeded the strike price.However, if on that day after the market closes, NVIDIA releases heavy news such as financial reports and the stock price falls to $100, then buying NVIDIA shares at a price of $105 will no longer be attractive.
Some investors can avoid this situation by sending a "do not exercise" instruction to their brokers. However, the ease and timing of sending such instructions to brokers vary. Some brokers set the deadline at 4 PM Eastern Time, which means that clients must make a decision without knowing the results of the financial reports.
Options were once considered a complex financial instrument, suitable only for professional traders, but in recent years, options have become increasingly popular among retail investors. Over the years, the options market has continued to evolve, offering more frequent expiration dates for trading, from quarterly, to monthly, to weekly, and now in some cases even daily.
Expiry options have raised concerns among some Wall Street institutions, such as JPMorgan Chase, which believes that this could exacerbate broader market volatility.
Expiry options have attracted the enthusiastic pursuit of a large number of retail investors, despite skeptics calling it a form of gambling.