There is currently a particular trend happening where investors, both experienced and day traders, are using a special type of option called “0DTE” to make big bets on the daily movements of the stock market.
What makes these options stand out is their remarkably short lifespan – they expire within 24 hours, yet they still allow investors to control a substantial $1,000 worth of stocks with just a tiny $1 investment, and the reason for these options offer such big potential returns is because they have a very short time before they expire. Options with less time left tend to be cheaper. It’s kind of like buying shorter insurance coverage for your home – it costs less because there’s less time for things to go wrong. Moreover, this type of trading has become more common since exchanges started offering these options every weekday. However, although they make up a significant part of options trading, the actual amount of money spent on them is relatively small compared to options that last longer.
Also, it is worth noting that even though this type of trading currently becoming very popular among traders, it is also raising concerns as some worry that it could make the stock market more unstable, taking into account that when you buy these options, you are essentially paying $1 to control $1,000 worth of stocks, and your profits or losses depend on how the stock moves within a single day.