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While trading zero days to expiration options isn’t new, its glamorization has gained plenty of traction, thanks to the spread of screenshots across social media featuring impressive gains and profits from trading such derivatives. From a mainstream media perspective, it seems that retail traders are becoming increasingly interested in the highly volatile derivative that is zero-day options.
According to a recent Bloomberg study, retail traders make up about 40% of zero days to expiration (DTE) options as they buy up S&P 500-related contracts. Whether they’re driven by the fear of missing out (FOMO) or greed, we may be seeing an entire mindset shift in the way retail traders are embracing the volatility of 0DTE options. From understanding the potential profits that can be reaped from the highly volatile derivative to grasping the risks involved when trading them, here’s everything you need to know when it comes to trading zero-day options in the crypto market.
Key Takeaways:
Zero days to expiration (0DTE) options, often referred to simply as "zero-day options" or "zero-DTE options," are a type of financial derivative contract.
Unlike traditional options that may expire in weeks or months, 0DTE options have an expiration period of just one trading day.
Due to their high volatility and rapid price movements, zero days to expiration options aren’t recommended for beginners. It's advisable to gain experience with traditional options strategies before attempting to trade ODTEs, which is considered to be one of the more advanced trading strategies available.