Trading in options contracts on the verge of expiration surged last week, just as the S&P 500 logged its first record close in two years, according to data shared by a top U.S. equity market strategist at Citigroup.

Options contracts with 24 hours or less left until expiration saw a spike in trading volume last week that coincided with Friday’s record close for the S&P 500
SPX.
According to data cited by Citi, an average of 1.8 million contracts fitting this description changed hands on average every day over the past five trading sessions. All told, 0DTE options accounted for 49% of total trading volume during this period, Citi added.

The surge coincided with a broader bump in options-market activity, according to the Citigroup report.

“The nominal volumes are a new record but the share is slightly below the August peak of 50.4%,” said Stuart Kaiser, head of U.S. equity trading strategy at Citigroup, in a report viewed by MarketWatch.

CITIGROUP

Trading volumes likely received a boost last week from the fact that monthly contracts attached to major equity indexes, exchange-traded funds and individual stocks all expired on Friday.

These so-called zero-days to expiration options have seen their popularity explode since early 2022 as options exchange operators like Cboe Global Markets have rolled out more weekly options products attached to the S&P 500 index and the SPDR S&P 500 Trust
SPY,
an ETF that tracks the index, along with other popular index-tracking products.

See: A potential stock-market catastrophe in the making: The popularity of these risky option bets has Wall Street on edge

The upshot is that by offering daily expirations, traders can trade 0DTE five days a week. Data from Cboe showed that the strategy reached a new record for popularity last year, with 45% of total volume in S&P 500-linked options trading on Cboe’s exchanges taking place in contracts on the verge of expiration. That is up from 36% in 2022 and 21% in 2021, Cboe data show.

The S&P 500
SPX
was headed for a fresh record close on Monday, after recording its first in two years on Friday. The index was up 0.2% at 4,851 in recent trade. The Dow
DJIA,
meanwhile, was flirting with what would be its first close north of 38,000, while the Nasdaq Composite
COMP
gained 0.3% to 15,359.

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