Here are the risky options being linked to the sudden demise of Wednesday’s initial stock-market rally

by | Dec 21, 2023 | Stock Market

For most of Wednesday, it was a typical trading day on Wall Street and one poised to send U.S. stocks toward superlative finishes. That was until something upended the momentum within two hours of the closing bell.

Analysts say the cause, at least in part, for the steep and unexpected drop in the S&P 500 index
SPX,
which occurred after 2 p.m. Eastern time, was linked to what’s known as zero-day to expiry options, or “0DTEs.” Such contracts have exploded in popularity since at least the beginning of 2023, and are being likened to lottery tickets for individual investors and to tactical protection for large funds. The options are relatively cheap to purchase and give an investor the right, but not obligation, to buy or sell a stock or other asset at a given price before a certain expiration date. Contracts linked to the S&P 500 are usually settled in cash, meaning that investors with “in the money” positions can get cash payouts or sell them at profits. Read: Here’s everything we know about zero-day options, the risky stock-market ‘lottery tickets’ captivating Wall Street and RedditIn a post on X, formerly known as Twitter, …

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[mwai_chat context=”Let’s have a discussion about this article:nnFor most of Wednesday, it was a typical trading day on Wall Street and one poised to send U.S. stocks toward superlative finishes. That was until something upended the momentum within two hours of the closing bell.

Analysts say the cause, at least in part, for the steep and unexpected drop in the S&P 500 index
SPX,
which occurred after 2 p.m. Eastern time, was linked to what’s known as zero-day to expiry options, or “0DTEs.” Such contracts have exploded in popularity since at least the beginning of 2023, and are being likened to lottery tickets for individual investors and to tactical protection for large funds. The options are relatively cheap to purchase and give an investor the right, but not obligation, to buy or sell a stock or other asset at a given price before a certain expiration date. Contracts linked to the S&P 500 are usually settled in cash, meaning that investors with “in the money” positions can get cash payouts or sell them at profits. Read: Here’s everything we know about zero-day options, the risky stock-market ‘lottery tickets’ captivating Wall Street and RedditIn a post on X, formerly known as Twitter, …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]

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