{"id":239237,"date":"2026-02-19T10:03:00","date_gmt":"2026-02-19T15:03:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=239237"},"modified":"2026-03-05T12:19:26","modified_gmt":"2026-03-05T17:19:26","slug":"the-fine-print-of-zero-dte-trading","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/podcasts\/the-fine-print-of-zero-dte-trading\/","title":{"rendered":"The Fine Print of Zero DTE Trading"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">As zero DTE options expand from indices to individual equities, understanding the mechanics behind expiration becomes crucial for traders. Options expert Mat Cashman breaks down the key structural differences between American and European style options and why the contra exercise window can make or break your zero DTE strategy.<\/p>\n\n\n\n<iframe title=\"The Fine Print of Zero DTE Trading\" allowtransparency=\"true\" height=\"150\" width=\"100%\" style=\"border: none; min-width: min(100%, 430px);height:150px;\" scrolling=\"no\" data-name=\"pb-iframe-player\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=hyn6q-1a4c9d3-pb&#038;from=pb6admin&#038;share=1&#038;download=1&#038;rtl=0&#038;fonts=Arial&#038;skin=1b1b1b&#038;font-color=ffffff&#038;logo_link=episode_page&#038;btn-skin=c73a3a\" loading=\"lazy\"><\/iframe>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-summary-ibkr-podcasts-ep-354\">Summary \u2013 IBKR Podcasts Ep. 354<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><em>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<\/em>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Hi everyone. This is Jeff Praissman with Interactive Brokers\u2019&nbsp;Podcast.&nbsp;It&#8217;s&nbsp;my pleasure to welcome back to the IBKR Podcast Studio,&nbsp;Mat&nbsp;Cashman principal and instructor of the Option Industry Council and OCC. Hey&nbsp;Mat, how are you?&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">I&#8217;m&nbsp;good, Jeff. Thank you. I also go by MOT if you want to call me&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-0\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Like&nbsp;Mot, the Hoople.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-0\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, exactly like Mot&nbsp;the&nbsp;Hoople, but not really.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-1\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s&nbsp;always good to have you back&nbsp;in&nbsp;this nice warm February day here on the East Coast. And today&nbsp;we&#8217;re&nbsp;going to&nbsp;talk about something that is&nbsp;a&nbsp;pretty hot&nbsp;topic&nbsp;in&nbsp;the last&nbsp;year&nbsp;maybe a&nbsp;little bit more, but short duration options also like,&nbsp;Zero&nbsp;DTEs&nbsp;or zero days to&nbsp;expiration.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-1\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, for sure. I think&nbsp;it&#8217;s&nbsp;been longer than a year, Jeff.&nbsp;I&#8217;ve&nbsp;been talking about this stuff for a long time now,&nbsp;and&nbsp;I wanted to talk about it a little bit in a slightly&nbsp;different way&nbsp;than we,&nbsp;we usually approach this conversation. A lot of this conversation about&nbsp;short, dated&nbsp;options focuses on things like&nbsp;speed and leverage&nbsp;and&nbsp;gamma.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And&nbsp;I&#8217;ve&nbsp;talked about that stuff on this podcast many times, right? And&nbsp;all of&nbsp;that&nbsp;Maters. But what tends to get a little overlooked in this discussion is structure, is the behind the scenes part of how these, these actual products and these options are designed and when expiration starts to compress and then become a regular cadence that happens in the market structure, really stops being a background thing and starts driving outcomes a little bit more&nbsp;and we want to talk about that today.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-2\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">This&nbsp;isn&#8217;t&nbsp;really&nbsp;a how&nbsp;to trade zero&nbsp;DTEs.&nbsp;It&#8217;s&nbsp;more about how&nbsp;they&#8217;re&nbsp;constructed and what sort of how they&nbsp;differentiate,&nbsp;I guess just by&nbsp;the&nbsp;pure&nbsp;amount&nbsp;of&nbsp;times&nbsp;that&nbsp;they&#8217;re&nbsp;going to&nbsp;expire versus regular expirations.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-2\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, absolutely.&nbsp;We&#8217;re&nbsp;not going to be talking&nbsp;about&nbsp;how to trade zero DTEs&nbsp;today. What I want to talk about is understanding what kind of option you&#8217;re trading, because when time gets&nbsp;really short, and sometimes, especially now, we have products that are going to look similar on the surface just because of their&nbsp;duration,&nbsp;but they can behave very differently at expiration depending on some of those. Parts of the back of how these things are&nbsp;structured,&nbsp;and people need to understand the differences there.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-3\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And just to take a step back for our listeners, obviously back in the day equity options expired, that&nbsp;expiration&nbsp;once a month, then it moved to&nbsp;weeklies. And then obviously index options&nbsp;different,&nbsp;they move to Wednesdays, I think, and Mondays and Fridays now&nbsp;they&#8217;re, every&nbsp;day basically.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And then also though. ETF options, which are more equity options, American style, which I&nbsp;I&#8217;ll&nbsp;let you explain to the listeners in a second.&nbsp;Started&nbsp;daily basically. And now as of&nbsp;I think it&nbsp;was January 26th, the NASDAQ&nbsp;listed,&nbsp;I think about nine or 10 equity options. So&nbsp;Mat, if you could kind of start&nbsp;just like the basics, like quick sentence on American versus European, why&nbsp;it&nbsp;matters, and then also, market kind of close market closes at four, but like, that&#8217;s not necessarily what we&#8217;re, that&#8217;s&nbsp;going to&nbsp;factor into our conversation. I&nbsp;don&#8217;t&nbsp;want to&nbsp;give too much away&nbsp;for&nbsp;the&nbsp;listeners.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-3\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah. No, of course.&nbsp;Yeah, there&#8217;s a couple of there. As people say on podcasts very often,&nbsp;there&#8217;s&nbsp;a lot to unpack there. Right, Jeff?&nbsp;The first one, I&nbsp;want to&nbsp;respond directly to&nbsp;the what&nbsp;you asked for, which is the,&nbsp;essentially the&nbsp;difference between American and European style options. The biggest difference, and particularly the one&nbsp;we&#8217;re&nbsp;going to&nbsp;talk about today, is that American style options&nbsp;have the ability to&nbsp;be exercised early&nbsp;before they fully expire, right?&nbsp;That&#8217;s&nbsp;part of the way that American style options are designed and it always has been.&nbsp;It&#8217;s&nbsp;part of kind&nbsp;of just how they work. European style options can only be exercised&nbsp;at the moment&nbsp;of expiry, and so they expire and are&nbsp;exercised all&nbsp;at the same exact time.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">American style options have the potential to be exercised early.&nbsp;So that&#8217;s&nbsp;going to&nbsp;factor into our conversation&nbsp;pretty significantly&nbsp;as this goes on.&nbsp;But you also said something&nbsp;about,&nbsp;the market closing at four and that is technically,&nbsp;four&nbsp;PM Eastern. That is technically true.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The stocks close around&nbsp;four&nbsp;PM Eastern. That part is true, but the lifecycle of these options, especially American style options.&nbsp;Don&#8217;t&nbsp;necessarily end at&nbsp;four&nbsp;PM So I think&nbsp;that&#8217;s&nbsp;something&nbsp;that I think we&nbsp;are&nbsp;going to&nbsp;talk about exclusively today.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Jeff Praissman &nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That&#8217;s&nbsp;a great point because there is&nbsp;a&nbsp;difference between the close of the market and then when&nbsp;there&#8217;ll&nbsp;be exercise and for our listeners that may not know this, there is&nbsp;automatic&nbsp;exercise process. If there, if your options are in the money&nbsp;they&#8217;ll&nbsp;generally, the system will&nbsp;generally handle&nbsp;it for you&nbsp;and obviously though, as&nbsp;the number of expirations increases&nbsp;this&nbsp;can become&nbsp;more and more&nbsp;important for your trading strategy. You could&nbsp;maybe walk&nbsp;through, like you can set and forget&nbsp;it&nbsp;and it gets exercised, but you can also&nbsp;send counter instructions to any of your brokers.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I think&nbsp;it&#8217;s&nbsp;important to point out&nbsp;that&nbsp;while there is a standardized time that the OCC needs to get either the exercise notice or the contra&nbsp;don&#8217;t&nbsp;exercise this. There&nbsp;are a&nbsp;couple hands that&nbsp;have to&nbsp;touch it first, right,&nbsp;Mat? And that&#8217;s&nbsp;sort of why, and they can differ.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s&nbsp;really important&nbsp;for listeners to check what their broker, what their cutoff, their specific cutoff time&nbsp;because it can vary slightly.&nbsp;And&nbsp;that&#8217;s&nbsp;something that&nbsp;you&nbsp;as an educated trader, you need to know.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-4\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, absolutely. And that I think is a big part of this conversation is that I&#8217;m trying to essentially advocate for people to understand as much of that as they possibly can, because essentially when you think about it, you\u2019re&nbsp;as an end user of the product, your actual agreement is with your trading or brokerage firm.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And so that agreement is&nbsp;what&#8217;s&nbsp;going to dictate like when you are and when you are not allowed to exercise or contra exercise those options. And so. The first thing I want to touch on is the difference that you mentioned, which is the&nbsp;auto&nbsp;ex&nbsp;process, right?&nbsp;That&#8217;s&nbsp;something, and it stands for auto exercise.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Obviously, we shorten it to auto ex, but what that really means is that most of the&nbsp;time&nbsp;options are in the&nbsp;money&nbsp;and they reach a certain threshold of being in the money, which usually is 0.01 cent in the money. If the&nbsp;option&nbsp;is part of the&nbsp;auto&nbsp;ex&nbsp;process, it will be automatically exercised if&nbsp;it&#8217;s&nbsp;in the money and not&nbsp;exercised, if&nbsp;it&#8217;s&nbsp;out of the money.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So that&#8217;s&nbsp;the way&nbsp;to set the table as far as what this looks like from the&nbsp;OCC&nbsp;perspective,&nbsp;that process&nbsp;covers&nbsp;a majority of&nbsp;options. If your option is one of those options that&#8217;s not part of the&nbsp;auto&nbsp;ex&nbsp;process, there is always an information memo that gets published and put on our website telling you that your option class is not part of&nbsp;auto&nbsp;ex, and if that is the case, you always need to decide whether or not you are exercising or not exercising that option.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But those are usually edge case scenarios. That happens often in things like corporate actions or when the&nbsp;stock&nbsp;is&nbsp;halted&nbsp;and the options&nbsp;aren&#8217;t&nbsp;trading, something like that.&nbsp;And so, if that is happening, you should&nbsp;definitely reach&nbsp;out to your brokerage firm and find out what&#8217;s going on there and&nbsp;take a look&nbsp;at the information memos on the&nbsp;OCC\u2019s website because they&#8217;ll be one if your options are out of&nbsp;auto&nbsp;ex.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But most of the time, the assumption of&nbsp;auto&nbsp;ex&nbsp;holds true. Where things get interesting,&nbsp;right,&nbsp;is around this thing that we mentioned, the contra exercise window, and that&#8217;s the period after the&nbsp;close&nbsp;when an investor can provide instructions that differ from what the&nbsp;auto&nbsp;ex&nbsp;process would normally do, and that&#8217;s what we want to talk about today.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-4\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Right&nbsp;and then it can go both ways, right?&nbsp;So,&nbsp;like if&nbsp;I&#8217;m&nbsp;short&nbsp;the&nbsp;option, I&nbsp;don&#8217;t&nbsp;have any control over it. And I&nbsp;don&#8217;t not, and&nbsp;if&nbsp;say&nbsp;it&#8217;s&nbsp;a 50 call and stock is going&nbsp;between,&nbsp;49.98 and 50.05. I may not really know whether&nbsp;all of&nbsp;a&nbsp;sudden,&nbsp;I&#8217;m&nbsp;going to&nbsp;be&nbsp;short stock or&nbsp;not come&nbsp;the next day.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And vice versa. Like if&nbsp;I&#8217;m&nbsp;long, long something and I am, whatever other, my positions may vary&nbsp;it may be&nbsp;advantageous&nbsp;for me to exercise it or not exercise it.&nbsp;&nbsp;I&nbsp;have to&nbsp;make that decision too if it keeps kind of bouncing around.&nbsp;I think what we&#8217;re&nbsp;going to&nbsp;get in&nbsp;today is obviously that risk&nbsp;increases when you&#8217;re going from indices or I should say ETF options in this&nbsp;particular case&nbsp;to&nbsp;now&nbsp;these individual equity options that are&nbsp;going to,&nbsp;that are listed and for several reasons, which I know you&#8217;ll get into.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-5\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, absolutely. And the real crux of this is the difference between what I mentioned before an American style&nbsp;option&nbsp;and a European style&nbsp;option, right?&nbsp;That&#8217;s really what we want to drive home here.&nbsp;And this is the part&nbsp;I think that&nbsp;people&nbsp;often miss, and what you just said is&nbsp;very true,&nbsp;contra&nbsp;exercise,&nbsp;that window can cut both ways. It can be that&nbsp;you&#8217;re&nbsp;opting out of an automatic exercise of&nbsp;an option&nbsp;that&nbsp;is in&nbsp;the money, right? If an&nbsp;options&nbsp;in the money and it finishes in the money at four o&#8217;clock eastern time, you still have time to&nbsp;actually give&nbsp;what we call contra exercise. Advice through your brokerage firm and then through the clearing member firm to OCC to make sure that you&nbsp;don&#8217;t&nbsp;exercise that&nbsp;option&nbsp;if you so&nbsp;desire, if&nbsp;it&#8217;s&nbsp;an American style&nbsp;option.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But it can also mean that you want to affirmatively exercise&nbsp;an option&nbsp;that technically finished out of the money. Right, like if you had an upside call&nbsp;and, in that situation,&nbsp;you were talking about stocks trading 49.95 and you own the 50&nbsp;call, and then after the close the stock goes to 53&nbsp;bucks, right?&nbsp;You are economically like&nbsp;it&#8217;s&nbsp;a good idea&nbsp;for you to exercise that&nbsp;option&nbsp;and that specific case. And&nbsp;so,&nbsp;in those situations you can also, when those economic situations change after hours. You can&nbsp;actually do&nbsp;that with an American style&nbsp;option, but you&nbsp;can&#8217;t&nbsp;do that with a European style&nbsp;option.&nbsp;That&#8217;s&nbsp;part of the&nbsp;reason why&nbsp;we&#8217;re&nbsp;talking about it,&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-5\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, and to be clear,&nbsp;there&#8217;s&nbsp;just nothing new as far as&nbsp;Zero&nbsp;DTEs&nbsp;versus weeklies versus monthlies. It&#8217;s just&nbsp;really more&nbsp;the cadence, right, it&#8217;s just a more frequent risk.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-6\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, absolutely. And I talk about this a lot as previously when&nbsp;I&#8217;ve&nbsp;talked about&nbsp;Zero DTE options more broadly. This is like options have&nbsp;always,&nbsp;had&nbsp;some sort of&nbsp;Zero&nbsp;DTE quality to them. We just&nbsp;didn&#8217;t&nbsp;have a name for it like we do now. Options have always expired on their&nbsp;expiration&nbsp;day.&nbsp;What&#8217;s&nbsp;different now is the cadence of&nbsp;expiry. And so instead of having one. Major&nbsp;expiration&nbsp;event&nbsp;every month, which used to be the third Friday of every month. You&nbsp;touched on&nbsp;this at the beginning of our conversation, right?&nbsp;The cadence changed it, then it went to Monday, Wednesday, Friday in certain places, and then it went to Monday, Tuesday, Wednesday, Thursday, Friday.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And so now what we have&nbsp;is a situation where&nbsp;you&#8217;re&nbsp;in many places,&nbsp;you&#8217;re&nbsp;seeing&nbsp;expiries&nbsp;every day. And&nbsp;so,&nbsp;the operational edge cases that used to show up occasionally, like what I was saying, right on the third Friday now are&nbsp;kind of a&nbsp;regular part of&nbsp;the&nbsp;regular rhythm of the market.&nbsp;And&nbsp;so,&nbsp;I think&nbsp;it&#8217;s&nbsp;important that we start to talk about that.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-6\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So,&nbsp;it&#8217;s&nbsp;again, like I said&nbsp;it&#8217;s&nbsp;not&nbsp;new,&nbsp;it&#8217;s&nbsp;just more frequent. And people&nbsp;hear,&nbsp;Zero&nbsp;DTEs&nbsp;and they assume that the risk is&nbsp;basically the&nbsp;same, whether&nbsp;it&#8217;s&nbsp;an index or an ETF or single stock. But&nbsp;that&#8217;s&nbsp;not&nbsp;the case at all.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And like, and especially now with these single stocks, like what are some risks that&nbsp;these single stock&nbsp;Zero&nbsp;DTEs have that,&nbsp;definitely the&nbsp;indices&nbsp;didn&#8217;t&nbsp;really have it. And even the ETFs are much more muted.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-7\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Absolutely. I think&nbsp;that&#8217;s&nbsp;really a core part of this discussion, and&nbsp;that&#8217;s&nbsp;where&nbsp;it&#8217;s&nbsp;worth being very explicit in this discussion. When&nbsp;you&#8217;re&nbsp;talking about something&nbsp;that&#8217;s&nbsp;a single stock, it has those kinds of idiosyncratic events, right? They&nbsp;have&nbsp;things that affect the stock specifically that&nbsp;wouldn&#8217;t&nbsp;necessarily affect the broader index.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now&nbsp;we&#8217;re&nbsp;in&nbsp;an environment where&nbsp;more of those broader indexes are made up of&nbsp;these cores,&nbsp;everyone&#8217;s&nbsp;talked about the magnificent seven&nbsp;over and over again. And&nbsp;so,&nbsp;it&#8217;s&nbsp;becoming more a part of the index, but&nbsp;you&#8217;re&nbsp;still dealing with something when&nbsp;you&#8217;re&nbsp;trading index options that&nbsp;you&#8217;re&nbsp;trading something that is more diversified than just an option on an&nbsp;individual&nbsp;name.&nbsp;Right? We could have things like corporate events that happen that&nbsp;only really affect this one stock and affect it in a very, and sometimes in a&nbsp;kind of like a binary way. And so&nbsp;that&#8217;s&nbsp;really where those edge cases have more risk built into them. When you&#8217;re talking about individual name&nbsp;Zero DTE options, it&#8217;s important to understand that and because of the fact that those options are American style options, like I said&nbsp;you have that early exercise potential where someone holds the ability to be able to exercise or not exercise that option within that specific window, and that&#8217;s&nbsp;going to&nbsp;make a big difference, right? Earnings announcements, guidance&nbsp;changes&nbsp;merger news, regulatory headlines, thinking, like,&nbsp;think&nbsp;about all those things, right?&nbsp;And&nbsp;they&#8217;re&nbsp;idiosyncratic to the name itself.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-7\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Right. And with those single listed&nbsp;Zero DTEs, those risks&nbsp;aren&#8217;t&nbsp;able to&nbsp;really&nbsp;diversify away&nbsp;like an ETF or an&nbsp;index.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-8\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Exactly&nbsp;and&nbsp;when&nbsp;you&#8217;re&nbsp;dealing with index options, the diversification of the index&nbsp;kind of absorbs&nbsp;some of that, those idiosyncratic things, right? Because&nbsp;it&#8217;s&nbsp;a broader based thing. But in this case, if&nbsp;you&#8217;re&nbsp;dealing with a single stock name, it&nbsp;doesn&#8217;t&nbsp;do that.&nbsp;And so that&#8217;s&nbsp;really important&nbsp;to understand.&nbsp;It&#8217;s&nbsp;the whole outcome of that&nbsp;option, especially within that window.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-8\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And why does that&nbsp;Mater more though for the Zero&nbsp;DTEs? Like if I own an Apple call&nbsp;that&#8217;s&nbsp;going to&nbsp;expire on Friday, like&nbsp;it&#8217;s&nbsp;still&nbsp;going to&nbsp;see those moves&nbsp;if it has those headlines that, on Tuesday or whatever, whenever they come out with earnings.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-9\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Absolutely it, the reason it&nbsp;matters is&nbsp;because&nbsp;there&#8217;s&nbsp;no time buffer left, right?&nbsp;It&#8217;s&nbsp;not&nbsp;a&nbsp;90-day&nbsp;option where you have 89 more iterations of price movement.&nbsp;In order to&nbsp;decide&nbsp;whether or not&nbsp;you&nbsp;want to&nbsp;exercise the&nbsp;option,&nbsp;it&#8217;s&nbsp;right now,&nbsp;it&#8217;s&nbsp;a zero day to&nbsp;expiration&nbsp;situation&nbsp;and in something&nbsp;that&#8217;s&nbsp;like&nbsp;an&nbsp;afterhours&nbsp;earnings&nbsp;move,&nbsp;you&#8217;re&nbsp;not reassessing it necessarily tomorrow.&nbsp;It&#8217;s&nbsp;an,&nbsp;it&#8217;s&nbsp;immediately&nbsp;relevant to what that&nbsp;option&nbsp;is worth and like how much you can make or lose depending on whether you exercise or&nbsp;don&#8217;t&nbsp;exercise. And so&nbsp;that&#8217;s&nbsp;why&nbsp;it&nbsp;matters with these because the time duration is shortened.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-9\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Right.&nbsp;So,&nbsp;you don&#8217;t get a second or third or a fourth or a fifth trading session to get to see what happens with the underlying.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-10\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Exactly,&nbsp;yeah. In longer dated options, right? The overnight move is something that you can digest and think about and be like, oh, does this change&nbsp;my, my overall look as to what this is, what my time horizon is, or whatever. In this case, right? The&nbsp;Zero DTE&nbsp;spot, it&nbsp;is the&nbsp;expiration.&nbsp;It&#8217;s&nbsp;the event. And&nbsp;so,&nbsp;it&#8217;s&nbsp;important to understand that.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-10\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So where do ETFs fit in this?&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-11\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">ETFs&nbsp;kind of sit&nbsp;somewhere in the middle, right? It&#8217;s,&nbsp;they&#8217;re&nbsp;diversified, but they still trade like equities, and technically they are equities. They still have after&nbsp;hours&nbsp;movement. They still hold underlying components that can be affected by sector specific news. And&nbsp;so,&nbsp;they&#8217;re&nbsp;kind&nbsp;of,&nbsp;they&#8217;re&nbsp;gray areas.&nbsp;I would say&nbsp;that&#8217;s&nbsp;in the middle.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-11\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And what about index options? I think a lot of people might confuse ETFs and indexes sometimes, right?&nbsp;Like they&#8217;ll&nbsp;see SPY and confuse it for SPX, but they are&nbsp;very different, right?&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-12\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, absolutely. Index options, like I said, for the most part, are predominantly European style cash settled options, and so that essentially, for lack of a better term, it strips a lot of this&nbsp;away&nbsp;as far as additional risks, there&#8217;s no early exercise, which also means there&#8217;s no contra exercise window, there&#8217;s no delivery of the physical underlying, because in many cases you&#8217;re talking about an option that&#8217;s trading on an index that actually doesn&#8217;t have a physical underlying, right?&nbsp;It&#8217;s&nbsp;that the underlying is this thing&nbsp;that&#8217;s&nbsp;made up of all the prices of the individual components of it, and so the settlement of that whole situation is very formulaic. And I&nbsp;think&nbsp;also you need to think about the fact that many times people have adopted those options in that way over time because of that reason,&nbsp;because of the fact that&nbsp;they don&#8217;t have to deal with&nbsp;the&nbsp;early exercise idea or the risks that are commensurate with that, dealing with the individual stock options.&nbsp;That&#8217;s&nbsp;part of the&nbsp;reason why&nbsp;people have, if you&nbsp;ask in&nbsp;institutional investors why they trade, like index options. Part of the reason is they want&nbsp;the diversification, but the other part of it is like I want to trade something&nbsp;that&#8217;s&nbsp;a European style&nbsp;option,&nbsp;so I&nbsp;don&#8217;t&nbsp;have to worry about&nbsp;whether or not&nbsp;it&#8217;s&nbsp;getting&nbsp;exercised&nbsp;early.&nbsp;And that&#8217;s,&nbsp;that&#8217;s&nbsp;a part of the way that risk is set up for those options.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-12\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So,&nbsp;a lot fewer&nbsp;chances&nbsp;something unexpected could show up, late, especially later.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-13\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah.&nbsp;Absolutely. And that, right, that&nbsp;doesn&#8217;t&nbsp;make sense. That&nbsp;doesn&#8217;t&nbsp;make index&nbsp;Zero DTE&nbsp;options&nbsp;low risk. It just means that the&nbsp;expiration&nbsp;mechanics of it&nbsp;are cleaner. They still have lots of other risks&nbsp;that are associated&nbsp;with it. But the end point, right? That time at&nbsp;four&nbsp;PM Eastern Time is different for that&nbsp;option&nbsp;than it is for an American style&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-13\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Right,&nbsp;which&nbsp;matters&nbsp;more, especially the shorter the duration gets.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-14\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, absolutely. And that, I also think&nbsp;that&#8217;s&nbsp;one of the reasons why those&nbsp;Zero DT option products scaled so quickly in the European style options, because the finish line is just simpler, just like I just said, right?&nbsp;Those institutional&nbsp;investors that&nbsp;choose those options for that reason. That kind of thinking about those options has been&nbsp;really prevalent&nbsp;in the adoption of those options&nbsp;also&nbsp;along the way that we&#8217;ve seen.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-14\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Mat, what do you think&nbsp;people&nbsp;misunderstand the most with these&nbsp;Zero&nbsp;DTEs?&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-15\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Well right now I think, and we&nbsp;haven&#8217;t&nbsp;seen this yet, right,&nbsp;we&#8217;re&nbsp;super early in the listing of these Mondays and Wednesdays on single stock names that are American style options. And&nbsp;so,&nbsp;I&nbsp;don&#8217;t&nbsp;want to&nbsp;like, sound any alarm bells or anything&nbsp;that&#8217;s&nbsp;not what&nbsp;I&#8217;m&nbsp;trying to do here. What I&#8217;m trying to&nbsp;pinpoint for&nbsp;people, is that I think one of the risks that might be on the horizon is that people are assuming that the mechanics of these are standardized because the symbols and the duration looks standardized, but the variability isn&#8217;t&nbsp;in&nbsp;the options contract, it&#8217;s in how the expiration process is handled like in an operational way&nbsp;and so that part is a little bit more opaque. It&#8217;s a little harder to&nbsp;understand,&nbsp;you&nbsp;have to&nbsp;go and dig kind of one level back and see like, okay, what are the contract specs of this? Is this an American style&nbsp;option&nbsp;or a European style&nbsp;option? And then you&nbsp;have to&nbsp;think about that time window. The&nbsp;auto&nbsp;ex&nbsp;process and&nbsp;all of&nbsp;those things when you&#8217;re dealing with American style options, but from the outside, especially if you&#8217;re just looking at it from a duration perspective, you might think like, oh, this is just a&nbsp;Zero DTE&nbsp;option, just like anything else, and not do that digging.&nbsp;What&nbsp;I&#8217;m&nbsp;encouraging people to do is do the digging to figure that out, because&nbsp;that&#8217;s&nbsp;where&nbsp;this&nbsp;matters.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-15\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And you want people&nbsp;to&nbsp;assume something and&nbsp;all of&nbsp;a&nbsp;sudden,&nbsp;the opposite happens and&nbsp;they&#8217;re&nbsp;like, wait a second, I thought this was&nbsp;going to&nbsp;happen&nbsp;and that happens instead.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-16\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, and we get, we get email questions about that already on our investor education desk&nbsp;and&nbsp;that&#8217;s&nbsp;just in, right, like options that are in individual stocks that have come to&nbsp;expiration&nbsp;and&nbsp;it&#8217;s&nbsp;on Fridays or whatever. And so now, right, the way I look at it, and I have to look at this and think like, okay, like how many more people are going to be emailing us with situations like that&nbsp;asking for an explanation is how this happens, and the answer is most likely, there&#8217;s&nbsp;going to&nbsp;be a lot more people talking about it and asking questions and things of that nature. So, part of my job as an educator is to get ahead of that and say like, listen, think about what this is,&nbsp;think about whether or not this option looks comfortably in the money or out of the money and whether or not it&#8217;s American or European style before you start,&nbsp;just&nbsp;like doing the set it and forget it vibe, right?&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-16\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Mat&nbsp;this has been great as always.&nbsp;Love having you come in, talk about options.&nbsp;Are&nbsp;there any&nbsp;final thoughts&nbsp;you&nbsp;want to&nbsp;leave our&nbsp;listeners with?&nbsp;I think you&nbsp;really covered a lot with the&nbsp;Zero DTEs, especially this, the new kind of&nbsp;additional&nbsp;risk&nbsp;added on&nbsp;for, individual equities. Again, we&nbsp;don&#8217;t&nbsp;want to discourage anyone we, from doing, trading or anything. We just&nbsp;want to&nbsp;make sure&nbsp;that&nbsp;everyone&#8217;s&nbsp;educated on potential risk&nbsp;and,&nbsp;knowing&nbsp;what&nbsp;they&#8217;re&nbsp;getting into before they get into it,&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-17\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, absolutely. I mean, I think&nbsp;that&#8217;s&nbsp;really the crux of the whole thing.&nbsp;My job as an educator is not to tell people, not to trade short-dated options. Obviously, my job is to make sure that people understand&nbsp;what&nbsp;they&#8217;re&nbsp;trading before they trade it or like when&nbsp;they&#8217;re&nbsp;trading&nbsp;it and&nbsp;help them to understand what that means.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s don\u2019t not trade short-dated options, it&#8217;s&nbsp;know&nbsp;what can move the stock and know particularly when your&nbsp;decision-making&nbsp;window ends because in this case&nbsp;it can be different from brokerage to brokerage and trading firm to trading firm&nbsp;and so make sure you understand what that cutoff time is.&nbsp;It&#8217;s&nbsp;a big deal. And right&nbsp;now,&nbsp;when&nbsp;we&#8217;re&nbsp;dealing with the transition into having zero DTE&nbsp;options that are moving into American style&nbsp;single names,&nbsp;it&#8217;s&nbsp;going to be something&nbsp;that&#8217;s&nbsp;going to&nbsp;show up on people&#8217;s radar because of the cadence of these expirations, right? We used to deal with it every third Friday, and now&nbsp;we&#8217;re&nbsp;going to&nbsp;be dealing with it&nbsp;every, like Monday and Wednesday in certain names and things of that nature.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And you can expect them to I, like when these things get listed, they generally expand as far as like, people like to use them, and I want people to use them&nbsp;for the intended purposes, but I want them to understand the limitations and the actual, the contract specs of what they&#8217;re trading.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-jeff-praissman-nbsp-17\">Jeff Praissman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Mat, thanks again for stopping by the studio. For our listeners, to get more from&nbsp;Mat, you can go to occ.com, you can go to IBKR.com, click&nbsp;on education. You can see all our past webinars and podcasts that we do&nbsp;and again, thanks, thanks for stopping by.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-mat-cashman-nbsp-18\">Mat Cashman &nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Absolutely.&nbsp;Thanks&nbsp;for having me. If you want more information about options education from the OIC, you can also go to options education.org.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As zero DTE options expand from indices to individual equities, understanding the mechanics behind expiration becomes crucial for traders. Options expert Matt Cashman breaks down the key structural differences between American and European style options and why the contra exercise window can make or break your zero DTE strategy.<\/p>\n","protected":false},"author":1087,"featured_media":239245,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[10842,13857],"tags":[],"contributors-categories":[13771],"class_list":["post-239237","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ibkr-podcasts","category-podcasts","contributors-categories-occ"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The Fine Print of Zero DTE Trading | IBKR Podcasts<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/239237\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Fine Print of Zero DTE Trading | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"As zero DTE options expand from indices to individual equities, understanding the mechanics behind expiration becomes crucial for traders. Options expert Matt Cashman breaks down the key structural differences between American and European style options and why the contra exercise window can make or break your zero DTE strategy.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/podcasts\/the-fine-print-of-zero-dte-trading\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2026-02-19T15:03:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-05T17:19:26+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/podcast-16x9-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Mary MacNamara\" \/>\n<meta name=\"twitter:card\" 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