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(Bloomberg) -- One of Wall Street’s most-popular option trades just got more popular than ever, fueled by Donald Trump’s volatility-inducing policy agenda and a push by Robinhood Markets Inc. to expand its product offerings.
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Contracts that expire within 24 hours made up a record 56% of the S&P 500’s total options volume last month, according to data compiled by Cboe Global Markets Inc., the exchange that’s at the center of the trading boom.
Demand for derivatives with zero days to expire, known as 0DTE, has climbed in the new year as unpredictable trade policy from Trump’s administration whiplashed the market at a time when the economy is showing signs of weakening. In the first two months, the S&P 500 posted daily reversals of at least 0.5% on eight separate sessions. On Monday, the index rose and fell by that amount before trading flat as of 12:20 p.m. in New York.
The turbulence has sparked a new wave of appetite for zero-day options as investors, big or small, flocked to the product as a way to either make quick money or hedge against wild market swings. To cater to the growing demand, online broker Robinhood in January extended its 0DTE line-up to a broader audience.
“The jump in 0DTE volumes is partly a function of higher intraday volatility but mostly a result of expanded access, with Robinhood rolling out index options trading to all its customers,” said Mandy Xu, Cboe Global Markets Inc.’s head of derivatives market intelligence.
Last Friday offered a lens into the market dynamic that has emboldened the latest 0DTE demand. The S&P 500 spent most of the session swinging between losses and gains as traders digested a decline in consumer spending and watched a meeting between Trump and Ukraine President Volodymyr Zelenskiy slip into a fiery exchange. Then, as US Treasury Secretary Scott Bessent said Mexico has proposed matching US tariffs on China while urging Canada to do the same, stocks rebounded, with the S&P 500 ending the day with a 1.6% gain.
Amid Friday’s gyrations, $1.4 trillion of S&P 500 zero-day contracts changed hands in notional value, just shy of an all-time high reached a week earlier, according to derivatives analytical firm Asym 500.
The fresh frenzy has again sparked a debate on Wall Street about its market impact. Derivatives strategists at Bank of America Corp. brushed aside concerns over a repeat of the volatility implosion in 2018, saying the 0DTE ecosystem has stayed balanced. Yet Rocky Fishman, founder of Asym 500, raised the question whether these rapid-fire, turbocharged contracts have played a role in fueling the wild market moves of late.