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The market for very short-dated options targeting U.S. stock movements has boomed in recent weeks, sparking concern among analysts that the daily burst of activity could lead to a sharp sell-off in stocks.

Since the start of the coronavirus pandemic, so-called zero-day options have allowed traders to build targeted positions in stocks around events such as economic data releases or monetary policy meetings.

Zero-day options in Wall Street’s S&P 500 now account for 43% of total S&P 500 options, up from just 6% in 2017, according to Cboe Global Markets.

Demand for zero-day contracts has surged further in the past three weeks as financial markets have become more volatile, analysts said. Global bond yields jumped to multi-year highs last week as investors adjusted expectations that central banks would soon be able to start cutting interest rates.

Four of the 10 days with the highest S&P 500 zero-day option purchases on record occurred in August, during which time the U.S. benchmark fell more than 4%, Nomura said. As of the week ended Aug. 11, zero-day options accounted for 55% of total dated options in the S&P 500 twice, a record high.

Some analysts say the popularity of options is exacerbating price swings in the benchmark index itself amid thin summer liquidity. They fear a repeat of 2018’s “Volmageddon,” when a spike in trading volatility sent several short-short volatility ETFs down.

Goldman Sachs said tens of thousands of bearish zero-day put option orders totaled $45 billion on Tuesday, forcing market makers who need to manage exposure to buy protective hedges. That forced them out of stocks and forced the S&P 500 down 0.4% in just 20 minutes, Goldman said.

A histogram of ODTE options as a percentage of total S&P 500 daily options volume shows a surge in popularity for zero-day options

Charlie McElligott, equity derivatives strategist at Nomura, said record zero-dated options buying “is a clear reason for the intraday volatility we’ve seen so far.” Excessive use of them increases the likelihood that a 1 percent sell-off turns into a 3 percent decline, he added.

However, CBOE Global Markets, the world’s largest options exchange, questioned the notion that those contracts contributed to intraday volatility.

“The order flow between buy and sell is very balanced, with diverse users and diverse use cases,” said Mandy Xu, head of derivatives market intelligence at Cboe.

“People are using these products for hedging, tactical trading, systematic strategies and yield enhancement,” she said. “If volumes are balanced, which is the vast majority of the time, there is no impact on market volatility.”

Institutional investors, including hedge funds and asset managers, account for most of the demand, according to JPMorgan research. Retail traders are also dabbling in the market — Reddit’s popular Wall Street betting forum is filled with comments from day traders who say they’ve won huge or lost thousands of dollars with zero-day options strategies.

A self-proclaimed “degenerate gambler” allegedly made $32,000 on Wednesday alone, though they admitted the strategy of buying bullish zero-day call options following a market drop is risky: “Not recommended.”

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