Cboe's Push for 24/5 Extended Hours: Implications for Options Market Liquidity and Trading Strategies

Cboe Global Markets has ignited a seismic shift in U.S. equities and options trading by announcing its 24/5 extended hours initiative on the EDGX Equities Exchange. This move, driven by surging demand from Asia-Pacific investors, aims to align U.S. markets with global business hours and enable real-time responses to macroeconomic events. However, the transition to a near-continuous trading environment introduces both strategic advantages and risks for investors, particularly in the options market.

Strategic Advantages: Global Access and Real-Time Adaptability

The 24/5 model bridges the gap between U.S. and international markets, allowing investors to trade during their local business hours. For example, Asian investors can now react to U.S. earnings reports or Federal Reserve policy shifts without waiting for traditional market open, according to a Cboe press release. This access enhances liquidity, as evidenced by the 135% surge in EDGX's early hours trading volumes between 2022 and 2024, according to a MarketsMedia report.

For options traders, the ability to hedge or arbitrage around the clock is transformative. Consider the rise of SPX zero-day to expiry (0DTE) options, which saw a five-fold increase in daily trading volume over three years. Retail investors, who account for 50–60% of 0DTE activity, thrive in this environment due to capped-risk strategies and disciplined execution, according to an FOW analysis. The 24/5 model amplifies this trend, enabling traders to adjust positions in response to global events like commodity price swings or geopolitical tensions.

Risks: Liquidity Thinning and Volatility Amplification

Despite its benefits, 24/5 trading introduces challenges. During off-peak hours, liquidity can become fragmented, leading to wider bid-ask spreads and slippage. A 2025 academic study found that high-frequency trading (HFT) in equities exacerbates this by sniping options market makers through put-call parity violations, further widening spreads, as shown in a 2025 academic study. For instance, during the 4:00am–7:00am ET early hours session, order-book depth is often thinner, increasing the cost of executing large orders, as shown in an Amberdata analysis.

Volatility also spikes during macroevent-driven sessions. When U.S.-China trade tensions flared in early 2025, SPX options volume surged to 6.4 million contracts, while VIX options saw a threefold increase in trading activity. Such events test market makers' ability to maintain liquidity, as they must balance risk through delta and gamma hedging while navigating thin order books, according to Cboe insights.

Evolving Trading Strategies: From Collars to Algorithmic Arbitrage

Investors must adapt their strategies to the 24/5 landscape. Traditional hedging tools like protective puts and covered calls remain relevant but require tighter monitoring during extended hours. For example, a collar strategy-buying a put and selling a call-can lock in gains during volatile macroeconomic announcements, but traders must adjust strike prices dynamically as liquidity shifts, as explained in a TradingBrokers guide.

Algorithmic arbitrage strategies are also gaining traction. Traders exploit price discrepancies between correlated assets, such as SPX and VIX options, using real-time data feeds to capitalize on convergence. However, this demands robust infrastructure, as low-liquidity environments can amplify execution risks, according to a Zen Trading guide.

Case Study: Macroevent-Driven Volatility in Action

A notable example occurred in April 2025, when a surprise inflation report from the U.S. triggered a 10% intraday swing in the S&P 500. During the 24/5 session, retail participation in SPX 0DTE options temporarily dropped from 57% to 47% as volatility spiked. However, as the market stabilized, retail flows rebounded, illustrating the resilience of disciplined traders in extended hours, as described in a Cboe post. This event underscored the importance of real-time monitoring and limit orders to mitigate slippage.

The Road Ahead: Regulatory and Operational Hurdles

Cboe's 24/5 model hinges on regulatory approval and infrastructure upgrades. The Securities Information Processors (SIPs), which currently operate only during traditional hours, must be extended to provide consolidated tapes during non-traditional sessions, as noted in the MarketsMedia report. Additionally, clearing agencies like DTCC must adapt to handle 24/7 settlements, a process that could take months to finalize.

For investors, the key takeaway is preparation. Those with access to advanced tools-such as real-time order-book depth analytics or algorithmic execution platforms-will thrive in this environment. Conversely, those relying on manual strategies may face higher costs and execution risks.

Conclusion

Cboe's 24/5 initiative represents a bold step toward a globally integrated market, offering unprecedented flexibility for investors. However, the path is fraught with liquidity challenges and volatility risks that demand strategic adaptation. As the industry navigates these changes, the winners will be those who embrace technology, refine their risk management, and stay ahead of macroeconomic currents.