Now, insouciant speculation has returned in another acronym, 0DTE, which stands for Zero Days to Expiration options. Short-term calls and puts have long been favorites of speculative traders because they cost less than lengthier contracts. To help traders scratch that speculative itch, the exchanges have been offering ever-shorter options until they got to 0DTE.

And their growth has been explosive, so much so that their trading volume is swamping the turnover in the underlying securities, reports Doug Kass, who heads Seabreeze Partners and flagged the 0DTE phenomenon for us. He likens it to the speculative frenzy once seen in the trading of hot initial public offerings, when new shares would change hands several times on their first day, he said in a phone interview.

These short-term options have succeeded meme stocks as the Street’s gambling vehicle of choice, adds Peter Tchir, the derivatives maven who heads macro strategy at Academy Securities. About 90% of his recent conversations are about 0DTE, he relates in an email. And Thursday saw record call-option volume, with the vast majority of expirations on Feb. 2 and Feb. 3. The SPDR S&P 500 exchange-traded fund (ticker: SPY), usually leads the most-active list; Tesla (TSLA) does the same among single stocks.

Eoin Treacy's view

This article goes a long way to explaining why the correlations between the VIX and stock market action have broken down this year. In a Bloomberg TV interview today Peter Tchir described the leverage on zero day options as close to 100:1 and that the VIX Index only looks at one-month volatility. 

If conventional market measures do not pick up the scale of volatility. that suggests models are blind to the risk from this portion of the market. The amplification factor from massive volume flowing into options with less than a day left to expiry is certainly a factor in the strength of the rebound seen year to date.

Tesla is one of the most actively traded stocks in the options markets and posted a downside key day reversal today to signal at near-term resistance in the region of the 200-day MA. That was on the back of news of a recall.