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Zero-Day Options

Zero-day options have gained popularity among retail traders since 2021, offering high-risk, high-reward opportunities. Scott Galloway explains that these options, which expire within 24 hours, can be likened to "collecting dimes in front of a bulldozer" due to their potential for significant losses 1. The Defiance Nasdaq Enhanced Option Income ETF, which writes and sells zero-day put options on the Nasdaq 100, has seen a 1.5% return since its launch, but the sustainability of these returns remains uncertain 2.

   

Retail vs. Institutional

Retail investors, driven by emotion and the thrill of quick gains, account for half of the options trading volume, compared to just 20% in regular securities trading 3. Scott highlights the ethical concerns of institutional investors capitalizing on the inexperience of retail traders, who often seek dopamine hits from these high-risk trades. He notes, "The premium that people are receiving is greater than the risk," making it more advantageous for institutions to sell options rather than buy them 4.