The outbreak of the US-Israel-Iran war has triggered a significant and immediate surge in the use of derivatives, especially for hedging against supply disruptions and market volatility. Volumes were already rising due to structural changes, and the conflict has only exacerbated the activity.
It is no surprise that short-dated options, particularly 0DTE (zero days to expiration), are seeing spikes in activity. As research from the CME point out, they thrive on volatility offering high-leverage, low-cost, and fast-paced trading opportunities. These options are particularly effective for capitalising on immediate price swings, caused by economic news, corporate earnings, or, in the crypto market, regulatory developments and token-specific catalysts.
A report from Barclays shows that ODTE options, which expire the same day they are traded, have seen record-breaking usage, accounting for 66% of total SPX volume last year and continuing to be a dominant, high-volume strategy in early 2026.
Since the conflict started, traders are using them to navigate intraday price gaps caused by the headlines. There has been a significant increase in put option demand relative to calls, as investors seek “same-day insurance” against further escalations or retaliatory strikes.
It has also been a busy time for crypto derivatives, which is one of the fastest-reporting options markets. Call option volume soared to a 63% share versus 37% puts within 24 hours of the escalation. This represents a major swing in positioning, showing traders aggressively repositioning via options rather than spot trading.
Looking ahead, it is difficult to predict how the conflict will unfold but options pricing is currently signals high uncertainty and elevated risk. As a result, investors will continue to actively hedge against further escalation in the Middle East by buying ODTEs, protective puts or using straddles to profit from large, violent price swings.
The latter is a common options strategy enabling investors to hedge their bets by holding both a call and a put with identical strike prices and expiration dates. They think the underlying futures market is going to make a move, but not sure which way.
