Nasdaq Plan Will Bring Zero-Day Option Boom Closer to Single Stocks
(Bloomberg) — Nasdaq Inc. wants to increase the number of days that options on megacaps like Nvidia Corp. and Tesla Inc. can expire, in what could be a key step toward expanding Wall Street’s zero-day trading boom to single stocks.
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The explosive growth in the buying and selling of derivatives with less than one day to expiration — known as 0DTE options — has so far been largely contained to contracts tied to major indexes such as the S&P 500 and a handful of corresponding ETFs. That’s because they boast daily expirations, whereas options on single equity names only expire on a Friday.
Nasdaq has filed a proposal to expand those weekly expirations for a small group of qualified stocks to add both Monday and Wednesday.
Pending an approval from the US Securities and Exchange Commission, options with those maturities are expected to start trading as early as the first half of 2026, according to the exchange operator. The move is aimed to help investors “more precisely manage their portfolios and their risk in a transparent, liquid, and secure marketplace,” a spokesperson said.
The step up to three days would echo the process followed with S&P 500 options. They also expired on a Monday, Wednesday and Friday until 2022, when exchanges including Cboe Global Markets Inc. expanded expirations to every weekday. That set off an avalanche of trading activity as investors flocked to the fast-twitch derivatives for both hedging and speculation.
0DTE contracts now account for more than half of the total traded volume of options tied to the S&P 500.
The route to success with individual names is likely to be more complicated. Single-stock options are typically physical settled, rather than cash settled as in the case of index options. That creates extra risk especially for retail traders, who may not be aware of the difference. In the event a stock gets assigned upon expiration and then plunges overnight on news such as disappointing earnings, the contract owner can be exposed to substantial losses.
In a bid to alleviate that kind of risk, Nasdaq is proposing not to list any Monday or Wednesday expirations that would coincide with a company’s earnings release.
Meanwhile, to ensure sufficient liquidity and demand, the exchange group is proposing only to provide the additional expirations for options on stocks with a minimum market cap of $700 billion, or exchange-traded funds with a net asset value of more than $50 billion. The underlying securities will also need to meet certain criteria surrounding options volume and open interest.