Zero-day options have arrived for Europe's most popular stock market index

By Barbara Kollmeyer

But will their popularity ever match reach Wall's Street's 0DTE frenzy?

Credited for exacerbating a down day for Wall Street earlier this month, an increasingly popular stock option is now available for one of Europe's most popular stock indexes.

Deutsche Boerse's Eurex, an international futures and options exchange, is now offering investors the ability to trade in zero-day options for the Euro Stoxx 50 index XX:SX5P.

"Institutional demand for options with short-term expiries has strongly increased as investors seek to react quickly and precisely to specific market events," said the exchange organization in a press release last week.

There's been a phenomenal rise of so-called 0DTEs (zero days to expiration) ptions across the Atlantic.

Launched by two major U.S. derivatives exchanges last year, trading volume on options linked to the S&P 500 SPX or an S&P 500-tracking exchange-traded fund, such as the SPDR S&P 500 Trust SPY, soared in August to record highs. That's as feverish activity those options was also blamed for driving a sudden U.S. stock selloff earlier this month.

Also read: 'This is a no-rules market'. Goldman strategist explains why recent stock moves have confounded traders

The CBOE said in an email that total volumes for S&P 500 Index options in July was more than 2.6 million contracts, with roughly 46% of that volume (1.2 million contracts) in 0DTE contracts. For August, the total volume for SPX options was 2.9 million contracts and 0DTE options comprised approximately 50% of that.

"It is too early to tell what the appetite is. In the U.S., these instruments have become the most traded in equity options and especially by individual investors, so it would be fair to assume that 0DTEs will be popular in Europe," said Saxo Bank's head of equity, Peter Garnry, in emailed comments.

According to Deutsche Boerse, futures and options on the Euro Stoxx 50 are the most traded, with nearly 19 million index options and more than 15 million futures contracts traded at Eurex in July.

But the concept of zero-day options in Europe is not exactly new, according to Koen Hoefgeest, a professional options trader based in the Netherlands. Daily Amsterdam Exchange Index options, also known as 0DTE options, were introduced on Euronext Liffe Options Exchange on March 31, 2008 after the success of AEX Index weekly options, he told MarketWatch in emailed comments.

Now housed at what's known as ICE Futures Europe, after a series of takeovers, the AEX NL:AEX options expire at the end of the day providing there is no other weekly or monthly index option expiration that day.

Citing Euronext data, Hoefgeest said overnight options trading made up 23.4% of total AEX options trading in the first few months of this year, versus 21.2% in 2022 as a whole.

"So there is no real frenzy going on in daily options in Amsterdam," he said.

"From my point of view, interest from private investors will not be overwhelming. How professional parties will use the new daily Euro Stoxx 50 options for leveraged products or hedging activities is uncertain, but I don't think they will take off as quickly as in the U.S.," said Hoefgeest.

Saxo Bank's Garnry said "judging from our client behavior [0DTEs are] something traders like a lot, so again I think the evidence is staked in favor of high interest on the 0DTEs from Deutsche Börse."

Also read: Here are 5 ways that trading in 0DTE stock options is changing how the market works

-Barbara Kollmeyer

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08-28-23 0932ET

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