For the last couple of months I've been writing about tokenization. I'm setting that aside this week. I've been wanting to write this one for a while, and it goes back a lot further than blockchains, to the business I grew up in.
An option used to be something you held for weeks or months, a bet on time as much as on price. The contract that now makes up the majority of S&P 500 options volume gives you none of that. It expires the same day you buy it, and a few years ago it barely existed.
I started in 1977 as an options Account Executive and was on the floor by 1978. If you had told anyone standing in those pits that the most heavily traded option in the market would one day live and die inside a single session, they would have laughed you out of the place. That contract is now 59% of the book.
What Happened
They call it a 0DTE, zero days to expiration. I still find it a strange thing to say out loud. For most of my career an option was a position you carried, sometimes for months. This one you open and close inside the same session. No overnight gamma to hedge, no weekend decay working against you. The clock runs a few hours and the contract is settled and gone.
CBOE added daily SPX expirations in 2022 and filled in Tuesdays and Thursdays the year after. Last year Nasdaq won SEC approval for daily expirations on the Magnificent Seven, Broadcom, and the iShares Bitcoin Trust. The single-name list is now broad enough that a retail trader can put on a position in almost any large-cap they follow and have it resolved before they get home from work.
Pull CBOE’s own numbers from this quarter. Same-day options run 59% of total SPX options volume. Retail share inside that flow swings with the vol regime. It fell toward 47% during April's tariff selloff and was back above 60% once things calmed.
What I See
This compression is a different animal from the ones I lived through. Every time the settlement cycle got shorter, T+5 down to T+1, there was a regulator on the other side of it. SEC orders, transition dates, comment files. The move to same-day options had none of that. CBOE added the expirations because the demand was there. Dealers leaned in once they worked out how to make markets in them. Retail piled in because Robinhood put a same-day trade two taps away.
Most of the argument about these zero-day options has gone in circles. One camp says it manufactures instability: gamma squeezes, prices pinning into the close, retail getting carried out. The other says realized close-to-close volatility hasn't moved since these contracts showed up, so the fear is overblown.
Both camps are watching the wrong number. The risk in a contract that lives a single day was never going to show up in close-to-close data. It shows up inside the session. CBOE even built a gauge for it. The VIX1D measures one-day implied volatility, and it runs 20% to 40% above the regular VIX when markets are calm, north of 100% when they are not. That premium is the price of day-shaped risk, the kind that barely existed when the shortest option you could buy still had a week to run.
What I’m Watching
How dealer balance sheets hold up. Net market-maker exposure to same-day options looks small, because nothing carries overnight. But intraday gamma can turn violent in a hurry, and the firms that built fast intraday risk systems are taking share from the ones that didn't. That is the oldest pattern in this business.
Whether single-name zero-day options spread past the current list. Nasdaq hand-picks which names are eligible right now. Open that list up and you put same-day retail flow on a lot more stocks that may not be ready for it.
What CBOE does next with the VIX1D. The index exists, but there is still no tradable future on it. The day they list one, intraday volatility turns into something you can actually hedge, and the balance between dealers and retail shifts all over again.
Whether any of this reaches the SEC's tokenized-stock framework when the proposing release lands. A rule that handles spot equity but ignores how a tokenized share would trade against a same-day option on the same name leaves out the most active corner of the market. The listed-options gap I pointed to last Friday only gets wider as same-day expirations keep taking over the book.
Bottom Line
Equity options started out as a way to trade time. You bought time, you sold it, you put a price on it. Now more than half the market trades an instrument with almost no time left in it at all. Same market, different instrument.
The floor I walked onto in 1978 priced an option by how many days it had left to live. The market today prices most of its book by how many hours. The firms that read that shift early are already trading it. The rest of the Street is still catching up to a market that already moved.
All the best,
— Tony