Based on individual stocks in the US stock market, the earliest date for options is expected to be launched in 2025. Some advocates suggest a limited release targeting only a few stocks in the early stages to give investors time to adapt. Over the past year, several heavyweight Wall Street companies have discussed the pros and cons of individual stock options. Options for nvidia and tesla are expected to have daily expiration dates.
The trend of zero-day-to-expiry options (#0dte) in the USA market started to become popular in 2022, driving trading volumes in the options market to record levels. Now, Wall Street is seeking to further fuel the craze for zero-day-to-expiry options.
Currently, zero-day-to-expiry options are mainly limited to options linked to indices such as the s&p 500 or nasdaq 100. Zero-day-to-expiry options allow investors to bet on whether a stock market index will rise or fall by the end of the day.
The next breakthrough sought by Wall Street may be stock options based on individual stocks, such as Nvidia or Tesla. $Tesla (TSLA.US)$ At present, individual stock options expire once a week, usually on Friday. In order to introduce end-of-week options for individual stocks, exchanges need to add option expiration dates from Monday to Thursday. $NVIDIA (NVDA.US)$ At present, individual stock options expire once a week, usually on Friday. In order to introduce end-of-week options for individual stocks, exchanges need to add option expiration dates from Monday to Thursday.
Reportedly, over the past year, several heavyweight Wall Street companies have discussed the pros and cons of introducing zero-day-to-expiry options for individual stocks in closed-door industry meetings:
Schwab, Tastytrade, E*Trade, and other brokerages under Morgan Stanley are calling for caution, fearing that if investors' options trading fails, they may face strong reactions from clients.
Other companies— including major options market maker Susquehanna International Group and nasdaq— are actively promoting the introduction of daily expiration mechanisms for individual stocks. Market makers and exchanges both stand to gain more profits from further development of zero-day-to-expiry options.
Stock-specific zero-day-to-expiry options are expected to be launched as early as later in 2025. Some advocates suggest initially limiting the release to a few stocks to allow investors time to adapt.
Wall Street financial industry executives hope that the introduction of individual stock options will trigger a trading frenzy. However, this will also bring new risks to investors, especially on days when companies release financial reports. Currently, individual stock options expire on Fridays, but few companies release financial reports on Fridays, so the impact of financial reports on the expiration of options is limited. Once individual stock-based options are introduced in the future, more options will expire on the same day with significant price fluctuations after the market closes.
When index options expire, funds will flow into or out of investors' brokerage accounts through cash settlement. Individual stock options, on the other hand, are settled through the buying and selling of stocks, which poses potential risks to investors.
For example, an investor holds 1 contract of Nvidia call options with a strike price of $105. If the closing price of Nvidia options on the expiration date is $106.5, the cash in the investor's brokerage account will decrease by $10,500, and the investor will acquire 100 shares of Nvidia stocks. Holding this call option is profitable because the stock price exceeds the strike price.
However, if Nvidia's stock price drops to $100 due to heavy news such as the release of financial reports after hours on the same day, buying Nvidia stock at $105 will no longer be attractive.
Some investors can avoid this situation by sending a 'no exercise' instruction to the brokerage. However, the difficulty and timing of sending such instructions to the brokerage vary. Some brokerages set the deadline at 4 p.m. Eastern Time, meaning clients must make decisions without knowing the financial results.
Options were once considered complex financial instruments suitable only for professional traders, but in recent years, options have become increasingly popular among retail investors. Over the years, the options market has evolved to offer more frequent expiration dates for trading, from quarterly to monthly, and now even weekly, and in some cases daily.
End-of-day options have raised concerns among some Wall Street institutions, with JPMorgan believing that this may exacerbate broader market volatility.
End-of-day options have attracted enthusiastic retail investors, although skeptics consider it a form of gambling.
Editor/Somer