Are Options Quietly Running the Market?

Options trading has exploded in scale, speed, and influence, but what does that actually mean for today’s markets? Mat Cashman of the Options Clearing Corporation joins IBKR’s Jeff Praissman to break down record-setting options volume, short-dated contracts, evolving risk models, and what traders should be watching as the market heads into 2026.

Summary – IBKR Podcasts Ep. 334

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hi everyone, this is Jeff Praissman with Interactive Brokers Podcast, and, uh, it’s my pleasure to welcome to the podcast Mat Cashman. Today we’re gonna be stepping back to look at option markets in 2025. So if you’ve been trading or hedging, or even just watching the markets this year, it’s probably felt a lot like a lot happened really quickly. So the question I’m gonna be asking is, you know, what actually changed, and what Maters going forward? And as I said, we have our special guest, Mat Cashman, the principal of Investor Education at Option Clearing Corporation, and a long-time options market practitioner—practitioners—and also a long-time friend of the show. Mat, welcome back. 

Mat Cashman

I am a long-time friend of the show. Jeff, it’s great to be here. Thanks for having me. 

Jeff Praissman

I love having you on the podcast, and especially as we wrap up this year, this seemed like a really appropriate topic to, uh, tackle. And I can think of, uh, no one else that we’d rather have tackle it than you. So kind of let’s start at the—let’s start at the top, Mat. Uh, Mat. And, you know, when people look back at 2025, what should they understand about the scale of the options market? 

Mat Cashman

That’s a really great place to start, because that’s where some of the major changes have happened. I think the most important starting point for this year is that 2025 wasn’t really a pause year. It wasn’t a, like, digestion year, industry-wide. Um, options activity continued to grow meaningfully on top of what we had already as record levels in 2024. 
If you look at OCC-cleared volume through late 2025—we’re recording this, uh, kind of midway through December, so the full number is not going to be known—but, um, total U.S. listed option volume was running well ahead of 2024, uh, which, like I said, already was a record year. We’re talking about tens of billions of contracts. 
Average daily volumes are looking north of 60 million contracts across equities, ETFs, and index options. And if you multiply that 60 million average number times 252 trading days, which is how many trading days are in a year, you get north of 15 billion contracts, which is probably what we’re going to end up clearing for the whole year. 
And that growth wasn’t just isolated to one kind of product or one area; it was kind of across the entire venue. Equity options, ETF options, and index options all contributed to that. And, uh, that really Maters because it tells us that this isn’t just speculative froth in one part of the market. Options are now really like a—what people consider—a core risk transfer and kind of risk expression tool across the entire investment ecosystem. And that’s a— 

Jeff Praissman

So, Mat, so from what I’m kind of gathering from this, like this wasn’t just, you know, this huge—this big uptick in volume. You know, it wasn’t just like retail enthusiasm or even, like, one hot product, like, you know, everyone’s just diving into something like this. This was really, like, diversified and spread out. 

Mat Cashman

Yeah. Yeah, I think that’s a hundred percent true. Um, retail participation remains an important part of this market, but what you’re getting on top of all of that is institutions and advisors and structured product desks, volatility funds, and, uh, systemic strat—or systematic strategies, sorry. Uh, they’re all using options more actively than they have previously, even two or three years ago. And, you know, the options market in 2025 looks a lot less like a niche derivatives market, like you said, and more like market infrastructure that’s happening kind of across the entire spectrum. 

Jeff Praissman

And, you know, something—and not just in the options market—but something always amazes me, like how something, you know, new or novel—you know, if it’s working—becomes normal, right? Like, you know, a long time ago, like, whatever, 25 years ago, no one had cell phones, and now, like, no one doesn’t have them. But, like, kind of shifting into the option conversation—short-dated options, right? Like, they were something new not too long ago, but now they just seem like they’re part of the landscape. Like what—what, especially this year—like what changed? 

Mat Cashman

Absolutely. Yeah, I think this is a big, big story—not just the numbers and the rotation that we saw in ’24 and ’23 into these shorter-dated options. You know, I’ve been talking about zero-DT options for, like, you know, almost going on three years now, and 2025 is really the year that these shorter-dated options fully crossed the line from, like, “oh, that’s interesting,” and people thinking about it in an interesting way, to, like what you just said, which is, like, it’s becoming kind of institutionalized. It’s becoming this part of the baseline levels of the marketplace that we’ve seen, and zero-day options—and more broadly just kind of, like, short-dated contracts—have really become a persistent and a predictable share of index option activity across the industry. 
A ma—like a majority of the index options volume on many days is expiring within the next 24 hours. And that’s a huge—um—like, it’s a structural shift. You know, I mean, it’s important because they’re being used for intraday hedging, people who wanna trade event-driven positions, volatility expression, without the overnight exposure, which is a big part of kind of how those options work. And then systemic—you know, or systematic, sorry, I keep using those two words interchangeably—systematic income strategies, which is a lot of kind of where that flow is coming from. It’s not just directional trading, and it’s not just retail. You know, I mean, it’s across the entire spectrum. So that’s a big change in 2025. 

Jeff Praissman

Yeah, it’s huge. And it—you know—it’s funny, too, because, you know, kind of aging myself here, but, you know, I remember when weeklies came into play, and, like, everyone’s like, “oh my God, we’re gonna have expiration every week.” Uh, and now it’s daily. So, you know, obviously, you know, in the past we’ve talked about the Greeks and, you know—the obviously—and, and, you know, gamma and delta, the kind of the three big ones. But, you know, how do you know—with this less-than-24-hour expiration cycle—how does it change, you know, how the markets behave intraday when there’s such little time till they’re either, you know, either being assigned or exercised or going away worthless with, you know, such little leeway? 

Mat Cashman

That’s a good question, and it gets at the nuance of how I think we should think about this going forward. Um, it doesn’t really change necessarily—and I talk about this all the time—it doesn’t necessarily, I think, change where the market is necessarily going, right? It doesn’t, like—I think people try to glean a certain amount of, uh, idea about the direction of the market from those positions. But I think what it really talks about is kind of where the sensitivity lives. It’s—it’s far more—how I view it is, um, you shouldn’t necessarily look at the, you know, short-dated option portfolio of the broader market and think about, like, the fact that, you know, we’re going to this place as far as price is concerned. 
But what it says to me more is, if we do get to that level, because of the fact that there are larger option positions there, your sensitivity to what’s happening—and, like, your ears should kind of perk up a little bit more—because there’s just more potentially dynamic hedging that has to happen, and it has to happen quickly, right? We’re talking about options that expire very, very soon, and because of their risk profile, it begets a certain amount of dynamic hedging that is a part of that landscape and happens quickly when the market does move there. 
So it’s not necessarily something that is a systemic risk, right? When we first started thinking about this—just like you said—we were talking about, like, “oh, there’s gonna be a weekly expiration every week.” And then it became, right, a Monday, Wednesday, Friday, and then it became a Monday, Tuesday, Wednesday, Thursday, Friday thing. And people were talking about systemic risk that it might be a part of that landscape, and it hasn’t really played out that way. 
What it has become is a big part of how the market works. And so it’s—I think it’s really incumbent upon us to think about that, and think about that and how risk is handled, and think about that and how we look at the market on a day-to-day basis. 

Jeff Praissman

Yeah. And that—that’s a good point. And that’s something I think people don’t think about enough, is like, you know, how does clearing work with this, and margining and risk, and like, you know—so, you know, everyone’s just thinking of, like, the sexy part, the option part, but they’re not thinking of the under-the-hood. 
So, you know, how has the industry responded to this? You know, really a—a great—more of a, you know, not just demand for these products, but a demand on them to be able to make sure that these are, you know, safe. Safely handled, I guess would be the right word. And, um, you know, and everything’s above. 

Mat Cashman

Yeah, this year, I think, 2025 is of what I would call infrastructure response. It’s not like reactionary panic. It’s not people, you know, freaking out about these numbers being that big. It’s more, uh, clearing and risk frameworks that are kind of evolving to better reflect things like intraday risk, which OCC changed. You know, kind of how people are margined intraday—that happened relatively recently. They’re modeling jump risk in a different way, uh, and really talking about the non-linear behavior of these shorter-dated options. Uh, like I said, at the OCC level, enhancements to short-dated option margin modeling were implemented specifically to capture risks that don’t show up in an overnight traditional stress test, right? That’s an overnight that we’ve been using forever. Uh, but in a reaction to the fact that so much of this volume has rotated into these options that are expiring—that isn’t captured by the overnight risk modeling—the OCC changed how they actually margin shorter-dated options. And that’s part of that process going forward. And it’s a—it’s a proactive way to address things like this, to make sure that these systemic risks that everyone talked about when we first started thinking about these contracts don’t appear as these positioning trades get larger and larger. 

Jeff Praissman

And, you know, I—I do like the proactive approach. It’s always good not waiting for things to break. But, you know, is this something that retail traders should even care about, or, you know, is this sort of for them to— 

Mat Cashman

I mean, yeah. If you’re a retail trader, you should care about this, because guess what? Your broker, right, or your clearing member firm, who is being margined differently at the OCC level, um, especially if that requires more margin, uh, generally speaking, is not in a position where they feel like taking on all of that margin requirement themselves. 
This is a model that gets kind of, like, trickled down, right? And so margin models and clearing risk frameworks ultimately shape capital requirements at brokerage houses, which then essentially change the capital requirements for the customers of those brokerage houses, which are ultimately the retail clients. Um, it affects product availability—like what is there, what is available to trade, what are the things that we can trade based on the margin that we carry. And then it also sometimes affects how quickly firms can respond during volatile markets. When the risk models improve, the market becomes just more resilient. It becomes more robust. It doesn’t necessarily mean that it’s less accessible. It means that it’s built on a stronger framework underneath it, and I think that’s an important part of this also. 

Jeff Praissman

Yeah, no, absolutely. And, you know, as we’re winding 2025 down, you know, it is nice to kind of sit here and reflect on the year and, you know, what was some of the—you know, kind of the theme of this year is, you know, there’s—as probably every year—there’s always, like, new products, right? There’s always something coming out. You know, what—what are a few that stood out to you this year, in 2025? 

Mat Cashman

Uh, yeah. So for 2025, I think there were really two big ideas that dominated in that regard. The first one’s concentration. Like, I think we saw index products that were designed to isolate really specific thematic ideas, particularly like mega-cap tech exposure. I think that’s something that people have been talking about for a while, and 2025 was the year where I think a lot of that came to fruition. And a lot of these products give investors index-style efficiency with more targeted risk, right? Like a more granular way to express that risk. And then the second one—I think it kind of goes without saying—but it’s the options embedded inside wrappers. You see this everywhere in the ETF space, right? Defined outcome ETFs, buffered strategies, leveraged and inverse structures globally across, like, the entire options ecosystem all increasingly rely on listed options as the engine of how those products create those defined outcomes. Right? Anytime—and I always say this when I talk about defined outcomes and ETFs specifically—anytime you’re looking at something, especially an ETF, that says defined outcome in the title or in the name, they’re using options to create those defined outcomes, because there’s no other way really that they can do it. 
And so the through line here, I think, is this: options aren’t just something that you trade. They’re something that you kind of, like, build with. And the broader ecosystem is really starting to catch on to that idea and be able to use the leverage that’s inherent within those options to build these strategies and then push them out to the end user and make those things available across the board. 

Jeff Praissman

And, you know, another thing we—you know, I noticed—like, we also, you know, really starting to see an expansion in trading hours. You know, for example, I know Interactive Brokers offers about 10,000 U.S. stocks and ETFs almost, you know, 24 hours a day through extended hours. I think it’s like 23 hours and 50 minutes between exchange hours and extended hours, then our own overnight trading. Um, you know, what do you think the future of the industry with that is? 

Mat Cashman

Well, I think there’s only really one way to go as far as that’s concerned, right? Which is probably more access, more of the time. I think it’s a subtle but important shift because of all of the different things that we’ve already talked about as far as risk is concerned. Extended trading hours for index options continue to gain traction—more traction than they already had in 2025. More participants outside the U.S. time zones are accessing the U.S. risk using listed options. I’m sure you guys see that directly at IBKR, right? I mean, you’re a global firm that has a lot of customers that are outside the United States. 
Um, but this doesn’t mean that markets or the traditional markets are suddenly 24/7 like crypto. This is kind of going to be an incremental shift, just like you suggested. Uh, but it does mean that the idea—and I think this is another thing that we have to start to talk about as an industry—is what is a single trading day, actually? What does that mean, right? 
When you’re in an environment where there’s no necessarily closing bell like there used to be—right? Like, we’re dating ourselves again. We were talking about when they rolled out the weekly expirations for the first time and everyone freaked out. Well, now we’re getting to a point where we have to rethink the idea of the closing bell, and that might be something that kind of goes away. This has implications for things like liquidity provision, hedging behavior—think about all of the algorithms that are designed to hedge on the close, right, or through VWAP or things like that—and operational readiness across the brokerage and the clearing world. It needs to be something that is built into the conversation at many different levels as we’re moving in that direction. 

Jeff Praissman

So, Mat, just to clarify—you don’t think the exchanges are going back to being closed on Wednesdays, right? Just to really date ourselves, before we were even there, right? 

Mat Cashman

No, I don’t think that’s happening, Jeff. No—we’re headed the opposite direction, brother. We’re a one-way train that only goes one way, so yes. 

Jeff Praissman

Um, so—so looking ahead to next year—what should you know, what do you think people should be watching for in 2026? 

Mat Cashman

Yeah, so I think there’s three main things there. Uh, the first one is keep an eye on the shorter-dated options and how they continue to be integrated into, like, institutional workflows. That’s a big part of this. And then, as a kind of adjunct to that, uh, you know, the NASDAQ applied for single-name zero-day options in a very specified way. That’s a big part of that as well. That’s gonna be a continuing development in that story, so keep an eye on that. 
And then second, I think the risk modeling and the margin evolution that goes along with that—the more accurately that we are able to price and manage intraday risk, not only from OCC and the clearing side of things, but also, uh, operationally from the brokerage side of things at the individual level—the healthier this market is going to become. 
And then third, I think—always from my seat—is the education aspect of it. Options are powerful tools. They are, um, you know, they’re leveraged instruments, but only if people really understand the trade-offs that are embedded in them—what they can do and what they can’t do. Um, you know, so much of my time is spent trying to telegraph those concepts to people, and I know it’s, like, some—I probably sound like a broken record most of the time—but it’s a really important part of this, because they are leveraged instruments. And it’s a large part of how this market is going to continue to grow, by making sure that people understand how those contracts work. So 2025 showed us that options aren’t really a sideshow anymore. They’re central to how this market functions, and I think education is a big part of that as well. 

Jeff Praissman

Uh, Mat, this has been great, as always. And for our listeners, to get more from Mat, you can go to, um, www.theocc.com and, uh, optionseducation.org as well—or check out our website. Just click on the Education tab at IBKR.com, and you can check out past webinars, past podcasts, and upcoming events from, uh, Mat Cashman and our, uh, wonderful content providers. Mat, thanks again. Happy holidays. Have a happy New Year. 

Mat Cashman

Absolutely. Thanks for having me, Jeff. It was a pleasure, as always.