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DTE-tective Work: Cracking Same-Day Options

DTE-tective Work: Cracking Same-Day Options

Episode 264

Posted June 9, 2025 at 8:32 am

Jeff Praissman , Sean Feeney
Interactive Brokers

Zero-day options are exploding in popularity—but what’s really going on behind the scenes? Former Nasdaq Options Head Sean Feeney joins us to uncover the mechanics, risks, and potential of this high-speed trading trend.

Summary – IBKR Podcasts Ep. 264

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 IBKR Podcasts, and today we’re gonna dive into one of the most talked-about trends in modern option trading: zero DTE options—or zero days to expiration. What are they, where did they come from, and where are they going? 

With us is strategist and expert Sean Feeney, the former Head of U.S. Options at Nasdaq, and he’s here to break it all down for us. Hey Sean, how are you? 

Sean Feeney 

Hey Jeff, I’m doing wonderful. Thank you for having me. 

Jeff Praissman 

Always a pleasure. Really excited for today’s segment. Sean, we’ve covered this topic quite a bit over the past few years, but I always like to start simple—what exactly are zero DTE options? 

Sean Feeney 

Jeff, you’re touching my heart. Zero DTE options are option contracts that expire on the same day that they’re traded and have become quite popular over the past few years. Traditionally, options have expired on a monthly basis—going all the way back in time, on the last day of the month. 

Then it became the third Friday of the month. In 2005, and then more into the single stock space around 2009, 2010, and 2011, expiries became weekly, happening on each Friday. 

But demand for more precise risk management tools has led to expirations—especially in some of the most highly traded instruments—that are daily. And that’s what we really call zero DTE. 

They’ve taken off on the retail side, they’ve taken off with institutional traders as well, and a lot of the strategies around zero DTE have to do with either gamma scalping or event trading, some intraday hedging, and then naturally, of course, a bit of speculation as well. 

Jeff Praissman 

Yeah, I was just gonna ask you—you gave a nice concise rundown of the, I guess, the lifecycle of options listings there. 

Sean Feeney 

Yeah. 

Jeff Praissman 

So they’re clearly relatively new, these zero DTEs. 

Sean Feeney 

They’re new in the sense that the products have evolved to the point where options are expiring daily. However, the actual zero DTE event—and the first zero DTE event—came on July 31, 1973, which was the first day of an options expiration. 

You could have traded—I believe Xerox was one of the stocks trading in the early rounds—you could have traded Xerox options on that day of expiration, and that would have been zero DTE. 

The difference between the past and today is that we have much more frequent expiration cycles now, allowing for more zero DTE trading and for the popularity of strategies surrounding and utilizing those instruments to really take off and then hit home with either the retail or institutional community. 

Jeff Praissman 

And there’s been some—for the most part, though, they’ve been pretty much indices and ETFs, right? But there’s been some pretty big news lately, right? Nasdaq basically filed to list Monday and Wednesday expirations on individual stocks. 

Sean Feeney 

That’s right. 

Jeff Praissman 

Taken to the next level, right? Like, we had the usual suspects of our index, but now we’re into some individual stocks. So what’s going on there? 

Sean Feeney 

Sure. I’ll give a brief history from the past. In 2005, we listed weeklies, and those were Fridays. Then in 2016, SPX started to offer Monday and Wednesday options. SPY and QQQ, the ETF tracking stocks for those major indexes, started to list Mondays and Wednesdays, and then Tuesdays and Thursdays. 

Last year, TLT, GLD, SLV, UNG, and USO—all commodity-based and rate-based ETFs—began to expand their expiry profile. Now you have more expirations, and this is a phenomenon that I like to call continuity of product. As product becomes more continuous, the availability for hedging is really interesting. 

That latest news—that Nasdaq recently filed with the SEC—is to allow Monday and Wednesday expirations on nine very liquid securities. These are eight stocks and one ETF within that filing. 

Right now, zero DTE—as we are talking about it today, with non-Friday available expirations—is available for those indexes and ETFs. This filing, which is not approved yet, could really unlock it for stocks. They all have the same structure as existing options. 

This is huge because it brings that continuity of product into individual equities—not just the broad market positioning. 

Jeff Praissman 

Now Sean, why now though? Because I’m just thinking about this—there’s certainly significantly more unsystematic risk associated with single-name stocks versus an index or ETF. One example: earnings. Earnings come out, guidance changes, or just any kind of company news event that might be out of the ordinary. So I’m just curious—why did the exchanges feel this was a good time to bring these into the forefront? 

Sean Feeney 

This is a great question. Now, I’m not with Nasdaq anymore, but I did a bunch of work on this prior to my leaving—and really for two reasons: 

First, trading demand. You have people who wish to have short-term exposure and tools for individual names that do move around a bit. 

Second, the volume and liquidity within these mega-cap names is really there. Nasdaq is being smart about listing these, and they’re not allowing for the listing of options—specifically Monday or Wednesday options—on an announced earnings date. 

There’s typically a large outsized move after-hours that could impact or force an individual to take action. There’s a little bit of controversy around that, but it’s going to be a really interesting environment. I’m looking forward to reading through the public commentary as that filing is in its comment period, and then seeing exactly what happens with the approval process—and whether or not these get approved. 

Jeff Praissman 

Now I gotta point out too, though—zero DTEs are probably, overall, taking a huge part of the option volume. Correct? But there’s also critics of them, right? They say they’re too risky. You have some fast losses, raw speculation. Some even equate it to betting the over-under on a game. Is this really a fair comparison? 

Sean Feeney 

These are fair concerns, but it’s really all about education and intent—and how you’re using these options. 

Used properly, zero DTE allows for incredibly efficient risk management. For example, funds use it all the time to fine-tune exposure heading into macro events or to manage their intraday hedging processes. 

Do retail traders use these products? Absolutely. Is there risk? Yes, of course there’s risk. But that risk is no different than using other leveraged tools or using options that were expiring on a Friday or monthly options, and trading them on the date of expiration. 

If you really look back in time—go back to 2012, 2013, 2014—and look at all the data through to today, you’d see that 40–45% of any option on the date it is expiring is typically going to trade in that instrument—that zero DTE instrument. 

So, as more instruments and more expiries are added into the option chains, you’ll see an increase just naturally based on the amount of product that’s available and the overall amount of zero DTE trading. 

But these tools are very powerful and they can be used by anyone. If that Nasdaq proposal does get approved, I would really like to see what the effect of these options is on the securities which they are overlying. So, it’s going to be an interesting time period coming up. 

Jeff Praissman 

And another thing I like to point out too—because no one really, well, a lot of people—I shouldn’t say no one—but a lot of people don’t really think about it. Even people that trade options don’t think about all the work that goes on behind the scenes, under the hood. 

And one other concern I’ve heard, especially from clearing firms—and for our listeners that aren’t familiar with the underworkings of options—essentially there’s a central clearinghouse that makes sure that, to put it very simply, there’s no risk that I buy an option from Sean and Sean defaults and I never see it. 

So the clearinghouse makes sure that everything’s on the table, everything’s up front, and everything is financially stable—for lack of a better way to put it. 

The amount of work, especially from these retail operations desks and clearing firms—talking about the contrary exercise intent, or CEI, the notification windows—some are arguing that adding these single-stock expirations is just really adding to the complexity. 

That’s an operational complexity that’s already very complex—and adding more risks. What’s your take on this? 

Sean Feeney 

Again, spot on, Jeff. And this is a real issue underneath the hood of the options market, and one that industry vets have been speaking about very passionately over the past few years. 

When an option expires in the money by a small amount, the default rule is to automatically exercise those options. 

But if a trader doesn’t want to exercise those options—because of news or post-close movement—they have to submit what’s called a contrary exercise notice to their firm, their trading firm. 

So the two main problems here are: 

  1. The deadline for submitting one of these contrary exercise intent notices is typically 5:30 PM Eastern. That’s an hour and a half after the market close, and plenty of time for potential news events that could be market-moving in an individual underlying. 
  1. For firms handling thousands of accounts and managing all of these contrary exercises every day—potentially now five times a week per stock, where you have options that are expiring every day—there are definitely workflow pressures and operational risk that are taken on as a result. 

Now, secondly, for the retail traders—even experienced ones—they aren’t fully up to speed about their responsibilities for post-close moves and expiring options positions. 

That trader who has an option that’s expiring might not even have enough of a cash balance in their account to take delivery of an underlying security, or be authorized to establish a short position in the underlying security. 

If, for instance, they have a call option and it closes out of the money at 4:00 PM, and then by 5:30 PM Eastern the underlying security is two or three or four or five dollars through the strike price—and then the holders of that option end up exercising that option in a contrary fashion—those who are short that option can then be assigned and have to deliver short stock, and they might not even be able to do that. 

All of this said, I still absolutely support the expansion, because technology is catching up. Many brokers and OCC members are automating their CEI workflows—the contrary exercise intent workflows. 

And the industry is already discussing whether or not that 5:30 PM window should evolve to match the pace of trading. It’s really a speed bump, and not so much a stop sign. 

These post-close moves make exercise-versus-lapse decisions non-obvious. Clearing firms will worry about the missed notices that lead to position errors—and all of that will happen behind the scenes. 

But operationally, it should be seamless. Just make sure that you’re educated about your responsibilities—most notably, noting that if you are a holder of an option, you have all of the rights in that contract. 

And if you are the seller—or if you are the writer of that option—you have nothing but obligations. 

So if you have expiring options and you are looking at 4:00 PM Eastern and saying, “Oh, I’m short this call, and it’s close, but it’s not really there, and my firm didn’t close me out,” there is still risk. 

And you should absolutely take a look back, check in, and make sure you understand where that underlying security is trading around that 5:30 time period. 

And you should not have any issues. If you do, please—by all means—reach out to your trading firm and partner. 

Jeff Praissman 

So while the trading tools are evolving, the plumbing underneath is really still evolving as well. And we need to make sure that both are going hand in hand. 

Sean Feeney 

Yeah, exactly. We’ve innovated on the front end of this trade. Now we need the back end—which is operations, risk, and clearing infrastructure—to evolve in parallel. 

And I think Nasdaq’s cautious rollout of only nine names, no earnings dates, really shows that they understand that. 

And again, this filing is still unapproved so far by the Securities and Exchange Commission—it is in its comment period—and there is hot debate around it within the industry. 

So we might be putting the cart a little bit before the horse talking about it today, but I think it’s something your listeners should absolutely be made aware of—the opportunity to potentially trade Mondays and Wednesdays on some of their favorite underlying securities. 

Jeff Praissman 

No, it’s a great conversation. I’m glad we’re talking about it today, and it leads me to my next question: Where do you think it goes from here? What do you think the option space looks like in, say, the near term—say, one to three years? 

Sean Feeney 

Man, on the zero DTE side, I think we’re really just starting. 

We have more underlyings—potentially these single names, sector ETFs, and global indices. But the industry will remain mindful of public sentiment and marketplace demand and will carefully weigh any risk and reward before proposing any additional securities to add to this program or any of these buckets. 

There’s potential for some more differentiated strategies. You could even have AI-driven execution of zero DTE spreads. 

You could have these artificial intelligence programs searching for the right strikes to trade in given instances. And with better regulation and oversight—especially around volatility spikes—what Nasdaq is proposing is part of a long-term evolution toward a full menu of option products: 

One for every timeframe, from zero DTEs all the way to the LEAPS. 

And it’s the next step in creating a truly continuous, flexible options ecosystem. Product continuity is incredibly important. 

There’s plenty of potential for even CFTC and SEC collaboration on some of these higher-frequency activities. And I think it’s a really interesting place to be right now. 

Jeff Praissman 

So, final thought—Sean, should traders be excited about this expansion of zero DTEs? 

Sean Feeney 

Absolutely. It’s a forward-thinking move. Zero DTE options give traders precision and choice. And again, that continuity of product lets a trader or trading firm’s strategies evolve without calendar gaps. 

Used wisely, they can be a valuable addition to any toolkit. Education has to be essential, but the future of options today is faster, more flexible, and more customized than it’s ever been before. 

So I’d say absolutely—traders should be very excited and continuously looking into different ways to trade their favorite underlyings. 

And if you have any questions, Jeff, you know where to find me—but everybody else that’s listening here is gonna have to find you. 

Jeff Praissman 

Sean, thanks so much for joining us. It’s always a pleasure to have you here in the podcast studio. 

And for our listeners—obviously, if you’re interested in options, keep your eyes out for the ongoing fluidity of these SEC approval processes, the zero DTEs, and everything else option-related. 

You can find all our great podcasts on our website under Education. You can also go on any of the usual sources such as Spotify, Amazon Music, Apple Music, and so forth. 

And until next time—we look forward to seeing you guys back here. Thank you. 

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