0DTE Options: New Contracts on TLT, Commodities ETFs

Controversial “zero-day” options are spreading to Treasury and commodity markets.

kent
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Research Lead
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Reviewed by: etf.com Staff
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Edited by: Mark Nacinovich

0DTE options contracts have grown in popularity in recent years and have extended to the exchange-traded fund market in 2023.

The trend in options trading has now reached the Treasury and commodity markets, as Nasdaq is now listing new options contracts on widely traded ETFs investing in gold, silver, oil, natural gas and long-term Treasuries. 

0DTE Definition, Strategy and Risk 

“0DTE options” refers to options with a “zero days to expiration.” In other words, these are options contracts that are set to expire on the same day they are traded. Also known as "same-day expiration options,” these options are typically used for very short-term trading strategies and are considered highly speculative and risky because of their short time frame. 

The rapid time decay associated with options nearing expiration makes these contracts sensitive to changes in the underlying asset's price. 

Options contracts have a finite lifespan, and their value is influenced by factors such as the underlying asset's price, volatility, time until expiration and other market conditions. As the expiration date approaches, options may experience changes in their value, especially if there are significant moves in the underlying asset's price. 

Nasdaq Adds 0DTE Options Contracts on TLT, Commodity ETFs 

In the final trading week of November 2023, Nasdaq added 0DTE options contracts on five ETFs, including those that track gold, silver, oil, natural gas and long-term Treasuries. Investors and traders who engage in 0DTE options trading are often looking to capitalize on short-term price movements or take advantage of specific events, such as earnings announcements or other market catalysts. 

The five ETFs for which Nasdaq added zero-day options contracts are: 

0DTE Options-Based ETFs  

0DTE ETFs are exchange-traded funds that track the performance of options contracts that expire within the same day as the trade is made. These options-based ETFs use leverage to amplify the returns of the underlying index. Leverage, however, can also amplify losses, and that can lead to greater losses for investors.  

The first 0DTE ETF to come to market was the Defiance Nasdaq 100 Enhanced Options Income ETF (QQQY)

Options-based ETFs are relatively new to the market and gained popularity in 2022 and 2023 as covered call ETFs, such as the wildly popular JPMorgan Equity Premium Income ETF (JEPI) had massive inflows.  

Caution on 0DTE Options 

It's important to note that trading options with a very short time to expiration requires careful attention and active monitoring. The value of 0DTE options can change rapidly, and there is a high risk of losing the entire premium paid for the option if the market doesn't move in the anticipated direction. 

Additionally, 0DTE options trading requires a good understanding of options mechanics, market conditions and risk management. Due to the speculative nature of these options, they are generally not recommended for inexperienced investors, and individuals considering such trades should do so with caution and, if possible, seek advice from financial professionals. 

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.