In the past, adding hard work to the options market has increased overall liquidity, allowing investors to easily deploy customizations, hedges and roles throughout the expiration cycle. However, most symbols have only one expiration date per month.
In 2023, an additional Wednesday expiration date was added to five ETFs covering a diverse asset base (representing gold, silver, fees, oil and natural gas). Then, in 2024, ETFs representing gold, silver and Treasury interest rates also expanded to their expiration date on Monday.
Today we introduce theories into our tests by examining these symbols, which are now expired multiple times throughout the week, looking at what we do with our liquidity profile.
The expiration date is volume adritic and not cannibalistic
One potential concern when listing additional expiration dates is that it could only fragment liquidity from the redistribution position from the existing expiration date to the Friday expiration date to the new one.
However, when a mid-term expiration date for the week is introduced, Total amount increased Rather than being redistributed. Even the amount of existing Friday expiration dates has increased. Traders are now able to get jobs more accurately around certain events, such as economic data and product data, without carrying exposure for longer than necessary. And it brings the profits of new deals – not just thinner slices of the same activity.
Chart 1: List of more expirations add volumes to the ecosystem
More strikes means more open positions
Another way to measure the usefulness of adding expiration dates is to see open interest. Open profit measures the total number of open positions at the end of the trading day, so if an investor is trading on the same day as the expiration date, the interest opened does not change much. However, if a new expiration date helps with hedging or structured transactions, you should expect to see a growing interest in open interest.
Open interest has risen following the list of mid-week expirations across all five symbols. It’s a sign that investors are involved in their positions beyond their expiration dates and not only trade on the expiration date, but using them in strategies that last for days or weeks.
Chart 2: Open interest in weekly options has increased after new expiration dates are listed
The volume distribution is the same, there are more expiration dates now
The rapid growth of trading on expiration dates (so-called “0DTE”) has sparked concerns about market stability. And there is concern that increasing expiration dates to the mix could potentially increase the relative share of this deal.
But in this case, it didn’t happen.
Although the total volume has increased, the proportion of volumes made up of 0DTE transactions was fairly stable. This suggests that new expiration dates are being used across different types of time vision, as well as short-term transactions.
Chart 3: Volume distribution over the lifespan of options remains constant.
Why is this important?
Data tells a consistent story. New expiration dates throughout the week:
- Increase the volume of these symbols.
- It raises open interest.
- 0DTE sharing will not be changed significantly.
This suggests that new expiration dates can fill investors’ gaps and customize positions more accurately without distorting market quality.
