GameStop Corp

NYSE:GMEUnited States

Discussions have taken place between regulators and exchanges about allowing 0DTE options for some stocks, possibly as soon as 2025, according to a person familiar with the matter. The individual stressed that all the relevant parties are still in the "analysis phase" and are being "supercautious." Brokerage executives interviewed by Barron's said investors want the product, and some predicted it would be approved. "I think single-stock 0DTE trading is coming within the next two to three years," says Zacks of Moomoo. "There is demand for it, and people should be treated as adults with how they invest," Kinahan said. But a few things would have to be ironed out. Perhaps the biggest issue is how to deal with events like earnings releases; 0DTE options expire after the regular trading session ends at 4 p.m. Aftermarket trading following an earnings release and conference call may be even more volatile with 0DTE in the game. Peterffy says that having 0DTE options for companies would make sense, with limitations. He says he isn't concerned about the impact on megacaps or widely held large-caps. But there could be opportunities for fraud with less actively traded companies, just as there is with meme stocks that can be manipulated by hedge funds or gangs of retail traders. "Do it only for very liquid stocks," he says. "Otherwise it would be easier to manipulate the market, and there would be more things for regulators to have to watch." The Cboe is now the key player in 0DTE options, but that would likely change if they spread to equities. Other exchanges would come into the market, competing for trading volumes in a product that has already shown enormous appeal to many investors. "Any new options products must be well thought out by all industry participants to make sure it's ready," says Cathy Clay, global head of derivatives at Cboe. The key gatekeeper is the Options Clearing Corporation, the organization that issues and settles most options and is overseen by regulatory bodies in Washington. The OCC declined to comment, as did the option market's primary regulator, the Securities and Exchange Commission. Among exchanges, the Nasdaq and the New York Stock Exchange declined to comment. Wang, who trades on Moomoo, acknowledges he got lucky on his payoffs in 2022. On one of those days, he had bet on the S&P 500 going down the morning of a Fed meeting, and cashed in for $23,000 when stocks turned negative during Chair Jerome Powell's press conference. An even bigger payout came when the S&P 500 popped more than 5% in one day on a benign inflation report, turning his $26,200 position into $73,000, according to screenshots viewed by Barron's. Overall, Wang says, he made about $20,000 since he started 0DTE trading. But he now sets stop-loss orders and is only willing to take a $2,000 loss every month, not every day. "Trading sometimes involves luck," he says. "Don't treat it as a videogame. You never know where the market is going." Write to Paul R. La Monica at paul.lamonica@barrons.com This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires June 28, 2024 13:34 ET (17:34 GMT)