End-of-day options, also known as 0DTE (zero days to expiration) options, are options contracts that expire on the same day they are traded. This means that if the trader does not exercise their right by the end of the trading day, the option will automatically expire. The nature of these options makes them a fast-paced, high-risk, high-reward investment tool, primarily attracting traders seeking to profit from short-term market fluctuations. Due to their extremely short expiration time, the prices of end-of-day options are very sensitive to changes in the underlying asset's price, and even minor fluctuations can lead to significant changes in the option's value.
Characteristics of End-of-Day Options
Short expiration period: They are only valid within the trading day, making price fluctuations and risks relatively high.
High leverage: Due to the short expiration period, the time value of the option decays significantly, and the premium is usually low. Investors can control a larger value of the underlying asset with less capital.
High speculation: End-of-day options are mainly used for short-term trading and speculation on market direction.
High volatility: Due to the short expiration period, the price of end-of-day options is very sensitive to even small changes in the underlying asset's price, which can lead to significant gains or losses.
End-of-day options are not suitable for all investors. Their high returns come with high risks. As the expiration time approaches, the time value of the option decays rapidly, and even if the underlying asset's price moves in a favorable direction, losses may still occur. Secondly, the price volatility of end-of-day options is extremely high, which can lead to significant gains or losses. Finally, if the prediction is wrong or the underlying asset's price does not reach the expected level, the entire premium may be lost.
