Short-Dated Options Surge: Trends, Risks, and Technology Implications
Over the past two years, short-dated options, especially those expiring the same day they’re traded, have reshaped the U.S. options market. What began as a niche product has become a core driver of volume on major indexes like the S&P 500, with zero-day-to-expiry (0DTE) contracts now accounting for nearly half of daily SPX options activity. Retail traders are leading the charge, but the operational and risk implications land squarely on brokers, banks, and investment firms facilitating this flow.
This article breaks down what’s fueling the surge in short-dated options, supported by recent trading data, and examines the pressures these instruments place on infrastructure, execution, and risk management. We’ll also look at how trading technology is evolving to help firms manage the volatility, scale, and speed that 0DTE trading demands.
Short-dated options trading at record levels
The growth in short-dated options trading has been dramatic and quantifiable. Below are a few data points underscoring this trend:
- Market volume share
Options contracts with a day or less to expiration now account for nearly one-third of all U.S. options volume, up from only about 12% of volume in late 2019. This includes the so-called “0DTE” options that expire the same day they are traded.
- S&P 500 index (SPX) options
By the end of 2023, approximately half of S&P 500 index option volume consisted of zero-day contracts. For comparison, this share was just ~17% in 2020 and a mere 5% in 2016, illustrating how quickly 0DTE activity exploded. In 2024, SPX 0DTE activity continued rising, reaching roughly 47% of SPX options volume.
- Major ETFs
The popular S&P 500 ETF SPY also saw same-day options trading make up over 40% of its total options volume in 2023. Other ETFs that introduced additional weekly expirations similarly experienced jumps in short-dated trading share.
- Record overall volumes
The overall options market has boomed alongside the short-dated trend. 2024 marked the fifth consecutive record year for U.S. listed options activity, with over 10.2 billion contracts traded by November 2024, surpassing the full-year 2023 record of 10.1 billion. Short-dated products have been a significant contributor to this growth.
Several factors are driving this surge. Exchanges have steadily added more frequent expirations (for instance, moving from monthly to weekly, and now to daily expiries on key index products), giving traders more opportunities each week to trade expiring options. These products attract participants by offering precision in targeting very short-term market moves. In fact, in an industry survey, nearly 79% of market participants cited the finer tuning of strategies as a top benefit of having more expiration dates available.
Because short-dated options carry lower absolute premiums than longer-dated contracts, they lower the cost of entry for taking a position on an imminent event or intraday volatility swing. Traders can deploy strategies around specific events (e.g., an afternoon Federal Reserve announcement) or intraday market momentum without paying for time value that they don’t need.
As Charles Schwab analysts note, these options give traders a chance to “quickly capitalize on the volatility” of an index or stock in a single session. In effect, short-dated options have become a favored tool for short-term speculation and hedging, fundamentally changing trading patterns in the options market.
Retail participation and the 0DTE boom
One notable aspect of this trend is the heavy participation of retail investors. The rise of short-term options coincided with a broader retail trading boom that began during the 2020 pandemic. Retail traders’ overall share of U.S. options volume climbed sharply in 2020 (peaking around 48% of total volume) and has stabilized in the 40%+ range in recent years. These individual investors have shown a particular affinity for short-dated contracts.
Retail traders are drawn to short-dated options for several reasons. They offer the allure of large, quick returns: the leverage from options can turn a small move in the underlying into an outsized gain in a matter of hours. The flip side, of course, is the potential for large, quick losses. As FINRA cautions, any strategy that can earn profits rapidly can “quickly bring losses as well”, and 0DTE options by nature are very sensitive to even small market changes.
Brokers like Schwab likewise note that while the opportunity for quick profit exists, traders must be mindful that these contracts “can also quickly lead to substantial losses” given their short lifespan and lack of recovery time.
Importantly, the low cost of short-dated contracts (thanks to minimal time value) is a double-edged sword. Lower premiums make these options feel “cheap” and thus accessible to retail players operating with smaller capital: a trader can control a position briefly with less cash outlay than would be required for a longer-term option. This has democratized certain index bets that were once the domain of large institutions.
However, the low upfront cost belies the high implied leverage and risk: losing a $0.20 premium option may seem trivial, but many such bets can and do go to zero by the end of the day, and frequent trading of them can rack up significant losses. One quantitative analyst, commenting on the 0DTE frenzy, bluntly observed that with these volatile intraday bets “you can go completely broke” if the market moves against you.
Overall, retail enthusiasm has undoubtedly fueled the short-dated options boom. Brokers and market analysts have likened the phenomenon to a form of day-trading in options, where individuals rapidly trade same-day expiries much like they would trade stocks. A band of Wall Street firms has even taken notice and begun tailoring strategies to cater to this flow. For the firms that service this segment—brokerages, clearing firms, and trading desks—the message is clear: short-term options are now a mainstream product, and infrastructure must adapt to handle the surge in retail-driven volume.
Operational challenges for brokers and investment firms
The proliferation of daily-expiring options has introduced new operational demands on the infrastructure of brokers, banks, and trading firms. Handling an occasional monthly expiration is very different from coping with expiration events every single day. Some key operational challenges include:
- Volume of expirations and post-trade processing
With contracts expiring virtually every trading day, firms must process expiration-related tasks far more frequently. This includes option exercises and assignments, lapse of worthless options, and notifying clients of resulting positions or cash settlements. Tasks that once occurred only on the third Friday of the month (or weekly on Fridays for weeklies) are now a daily routine. An industry survey of market participants highlighted this concern – nearly all respondents acknowledged that adding more expiration dates increases operational workload, noting that processes which ran a few times a month might now need to run up to 20 times a month (i.e., daily) for each instrument. This is “manageable but non-trivial” additional work. Back-office systems, brokerage operations teams, and clearing processes have had to scale up to handle the higher cadence of expirations without errors or delays.
- Notification and client communication
Along with processing the events, firms must ensure timely communication with clients regarding expiring positions. For example, customers need to be alerted if an in-the-money option they hold will be automatically exercised, or if they need to take action (like instructing not to exercise, or closing a position before cutoff). Doing this at scale each day requires robust automation.
Missing a notification on a daily expiring option could lead to client confusion or financial loss (for instance, a client might not want an option exercised due to an after-hours news event, but if they aren’t given the chance to notify the broker, the default exercise could occur). Consequently, brokerage platforms have invested in streamlined notification systems and online portals that can handle daily expirations for thousands of accounts.
- Market data and systems capacity
Each new expiration date multiplies the number of option series listed for an underlying. This means more quotes and trades to process. Trading firms’ systems now ingest an enormous amount of data throughout the day for these rapidly changing contracts.
One respondent in the NYSE’s survey noted that technology could become an issue given “the massive amount of options market data” already being handled, and that adding expirations (with all their strike prices) inevitably leads to even more data throughput. Brokers and market-makers have had to ensure their quote servers, data feeds, and storage can accommodate higher message traffic as 0DTE options generate continuous updates.
Network bandwidth and processing power are critical: any latency in receiving quote updates or executing orders can be especially damaging when prices move in seconds. In response, many firms have upgraded infrastructure or moved more of their trading systems to low-latency cloud and colocation data centers to keep up with the flood of real-time data from short-lived options.
- Execution timing and coordination
Operationally, trading desks also face the need for precise timing in execution. Firms that write a lot of 0DTE options (such as market makers or premium sellers) often want to close or roll their positions minutes before expiration to avoid end-of-day pin risk or unwanted assignments. This requires close coordination between trading and operations to ensure that the cutoff times for submitting closing trades or exercise instructions are met without fail. Any slippage beyond the market’s close means the firm may end up unintentionally carrying an exposure overnight (or missing the chance to exercise a profitable option). Therefore, synchronization of clocks, timely trade reconciliation, and prompt cutoff procedures have become more important. Many brokers have instituted automated cutoff alerts or even auto-exercise decision engines that kick in for expiring options to reduce manual errors under time pressure.
Technology solutions for managing short-dated options
Given the heightened risks and operational complexity outlined above, it’s no surprise that brokers and trading firms are leaning heavily on specialized software and technology to manage short-dated options trading. Modern trading platforms are being adapted or built with features specifically designed for the challenges of 0DTE and other near-expiry contracts. Key areas where technology plays a role include:
- Real-time risk monitoring and analytics
Firms are deploying risk management systems that calculate Greeks (delta, gamma, vega, theta) and P/L exposures on a continuous intraday basis, rather than only at the end of day. Live dashboards can display up-to-the-second positions and theoretical values, alerting risk managers to any sudden swings in exposure.
Advanced risk software also supports intraday stress-testing: risk teams can instantly simulate how their portfolio would respond to, say, a 2% market drop in the next hour, which is invaluable for anticipating worst-case scenarios. Such real-time analytics go hand-in-hand with automated alerts: many platforms let risk managers set trigger thresholds on key metrics. This kind of real-time alerting gives firms a safety net for 0DTE trading, as they are not relying on humans to catch every development in fast-moving markets.
- High-performance order execution
The popularity of short-term options also demands high precision in trade execution. Because these options have a very short shelf life, traders need to enter and exit positions at optimal prices – every second and every tick matters. Trading software has evolved to facilitate this with features like low-latency order routing, smart order execution algorithms, and the ability to sweep multiple exchanges simultaneously for liquidity.
Additionally, auto-quoting and market-making tools are crucial for liquidity providers in these products: these tools can update option quotes in milliseconds in response to moves in the underlying, ensuring the market maker’s prices remain competitive and properly hedged. Without automation, a human trader would find it nearly impossible to keep up with the pace of a busy 0DTE trading day.
Thus, sophisticated execution management systems (EMS) and smart order routers have become part of the toolkit for any firm active in short-dated options, helping traders trade efficiently and precisely even under intense intraday volatility.
- Integrated market data and analytics
To trade or risk-manage 0DTE options effectively, software must handle a massive stream of market data and turn it into actionable insight. Specialized systems integrate live options order books, underlying asset quotes, and even volatility index data to give a holistic view of market conditions.
Some platforms now offer real-time volatility surface updates, recalibrating implied volatilities continuously throughout the day. This is important because traditional end-of-day volatility surfaces are inadequate for pricing near-expiry options, which can deviate significantly intraday.
By recalculating volatilities and Greeks in real time, software ensures that traders are using accurate pricing models for 0DTE contracts at any given moment. Furthermore, these systems often incorporate news feeds and event alerts (for example, reminding that an economic report is due at 10:00 AM) so that traders can anticipate spikes in volatility that will particularly impact very short-dated options.
In essence, technology consolidates prices, Greeks, news, and analytics into a single interface, enabling traders and risk managers to make quick, informed decisions.
- Automated risk controls
Firms are also leveraging software to enforce risk limits and mitigate human error in 0DTE trading. Many trading platforms allow firms to pre-set risk limit rules: for instance, maximum position size or notional exposure for 0DTE trades, or a maximum loss threshold on intraday positions. If a trader tries to exceed these limits, the system will block the order or require special approval.
Some systems go further by implementing auto-liquidation or position reduction if losses on an account reach a critical level intra-day, presenting a key safeguard given how rapidly losses can accumulate with leverage. This kind of automated risk control can prevent a scenario where a client or desk loses more money than they have, protecting both the firm and the client from catastrophic outcomes.
On the operational side, workflow automation is employed for end-of-day processes: for example, software can automatically generate exercise notices for expiring options, or auto-select which client positions to exercise based on clear criteria (such as in-the-money amount), reducing the chance of an oversight during the hectic market close. By automating routine but time-sensitive tasks, firms cut down the operational risk that something falls through the cracks when multiple options expire simultaneously.
Conclusion
The rise of short-term-investment options, especially same-day expiration options, has fundamentally changed the landscape for brokers and trading venues. While demand from retail clients continues to grow, the operational, risk, and execution requirements placed on institutions have become significantly more complex.
At Devexperts, we support brokers, banks, and investment firms with the infrastructure needed to manage this shift. From real-time risk analytics and margin controls to low-latency execution and intraday position monitoring, our systems are built to help firms handle the volatility, volume, and precision that short-dated and zero-dated options require.
If your business is facing challenges around short-term options trading, our team can help implement solutions that address both performance and compliance requirements—at scale.
Contact us to learn how we can support your trading operations with technology that’s purpose-built for today’s market dynamics.