The Controversial Rise of Zero-Day Options in Stock Trading

Zero-day options, specifically put options expiring within 24 hours, are being blamed for the sharp decline in US equities on Wednesday. Market observers suggest that the heavy trading volume in these options prompted market makers to hedge their exposure, pushing the market lower. The S&P 500 Index dropped 1.5%, its biggest decline since September, with the selloff attributed to the combination of overbought conditions, thin trading ahead of the holidays, and the influence of zero-day options. The debate continues on the broader impact of these options, with institutional investors using them to hedge short-term risk while retail investors make big bets with little money down.