SPX® 0DTE Options Jump to 61% Share on Retail Resurgence

Link to Report: Macro Volatility Digest

WHAT STANDS OUT:

• Implied volatilities fell across asset classes last week, led by interest rates, with VIXTLT down almost 20 pts to 125bps vol as bond yields moderated. Both credit volatility and credit spreads fell, with investors taking advantage of the move by resetting hedges. Volume in our iBoxx^® IG corporate bond index futures (IBIG) surged to a record high of over $1bn notional last Wednesday.
• The decline in the VIX® index last week far outpaced the rally in SPX spot, which accounted for less than half of the VIX move (given SPX gain of +1.9% wk/wk, the VIX index was expected to fall 1.7 pts vs. actual decline of 3.7 pts). The underperformance was due to a combination of lower fixed-strike vols (i.e. parallel shift lower in the vol surface) and lower demand for upside convexity. The lack of bid for far OTM calls stands out given the potential for Trump tariffs to be rolled back completely by the courts, suggesting most of the tariff optimism has already been priced in at this point.
• While overall May SPX option volumes moderated from their April highs, 0DTE options surged higher, making up over 61% of overall SPX volumes in May – a new record share and an increase of 9ppts from April. The jump was powered by retail traders, as retail 0DTE trading rebounded following a decline in April, with retail trading now making up 54% of total SPX 0DTE volume (vs. a low of 47% in April).

Chart: Retail Traders Power Increase in 0DTE Option Volumes in May

^{Source: Cboe}

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