The 0DTE happened in 1720, or the history of Leverage, and Bubbles
The Illusion of Novelty
So, how useful are archives for capital markets?
Actually, zero DTE happened in 1720. That created a fragile market. And if you add shocks, you have unpleasant outcomes in the market.
So the idea that things happening today sound new or extraordinary—but as Mr. Ray Dalio explained—when he experienced different situations in his investing career, he realized that this was new in his lifetime, but not new once you start studying a long period of history.
This is the link where you can find him explaining that.
https://youtu.be/Nd7iwKpRxvw?t=76
So, they mistook leverage for genius in that period, and there is a link that we are going to include here.
https://academic.oup.com/oep/article-abstract/59/suppl_1/i73/2568557?redirectedFrom=PDF
The South Sea Bubble and Early Derivatives
This is a paper which explains financial derivatives during the South Sea Bubble, which is the case of South Sea subscription shares.
Mr. Clément Juglar explains, in the 1880s, about the 1720 period and those subscription shares. He explains that there was, at the time, a payment of one shilling that was enough to subscribe to a £1,000 share. All ranks of people flocked to the exchange. Subscriptions were made without examination.
Branding Mania Across Time
Now, before we go into the recurring nature of financial innovation, which is just an increase in leverage or new leverage instruments, it is interesting to note the declination of the South Sea prefix attached to something else.
So in the text, he says there were, according to the expression of the day, South Sea houses, South Sea stocks, South Sea coaches, South Sea tea, South Sea country houses, South Sea jewels.
Now, you probably had something similar in the 1920s with radio this, radio that, radio XYZ. And then you probably had the same thing with internet XYZ, internet this, internet that, internet whatever. And I will let you do your Latin declensions using AI this, AI that, AI whatever, AI more, AI less—whatever you like.
The problem with reading the archives is that you realize investors really lack imagination. It is sometimes “gross” in repetition.
The 1720 “0DTE” Equivalent
But let’s come back to the zero DTE version during the South Sea Bubble.
Investors paid only a fraction upfront, around 10–20%, and could walk away instead of completing payment. They could also trade the subscription itself.
So this is very similar to an option.
They would pay, for example, £40 to £200 upfront for a £1,000 share. If the price rises, huge gain. If the price falls, it is abandoned. So there is a limited loss. It is basically a call option.
Tulip Mania: Leverage Before Modern Finance
And if you look into the tulip bubble, you find something quite interesting.
The key innovation, in other words the instrument of leverage, was the futures contract, or forward agreement.
During the tulip bubble in the 1630s in the Dutch Republic, many trades were not for immediate delivery of bulbs. Instead, people traded contracts to buy tulips later at a fixed price agreed today.
So those were called windhandel, or wind trade—literally trading air.
So they were essentially futures trading, a future contract or forward agreement.
The Mechanics of Leverage
The source of leverage was always the same. Often only a small deposit, or sometimes nothing at all initially, with settlement happening later.
For example, I agree to buy a rare tulip bulb for 1,000 guilders in three months. If the price goes to 2,000, huge profit. If the price collapses, you may default or renegotiate.
As usual, small capital controls large notional exposure. Pure leverage.
When Contracts Become Options
Some contracts became option-like.
Late in the bubble, in 1636–1637, something subtle happened. Many contracts were not strictly enforced. In practice, buyers could walk away by paying a small penalty fee.
This effectively turned them into call options with very large upside and limited downside.
This is strikingly similar to South Sea subscription shares and modern option markets.
What Historians Observed
Historians like Anne Goldgar and economists such as Peter Garber note that most trading near the peak of the tulip bubble was contract-based, not based on physical bulbs.
Contracts were frequently resold multiple times and rarely settled with actual delivery.
And after the crash, Dutch authorities allowed contracts to be canceled for a small fraction, around 3 to 10 percent of value.
Comparing the two bubbles
Feature
Tulip Mania
South Sea Bubble
Bubbles Are About Structure, Not Just Price
Now, if we compare the two bubbles, you can see that they are not really just about overpricing. They are about financial structure.
Both cases show new financial instruments, reduced upfront capital, asymmetric payoff—option-like—and rapid resale and speculation.
In other words, leverage plus optionality fueled both bubbles.
From Then to Now
And obviously, if you add credit conditions to that—if credit becomes tighter—then the ability to borrow to make those small deposits disappears, first on a global basis, on a macro basis.
And that brings us to today.
How are we looking in terms of new leverage?
Well, we have the share of zero DTE as a percentage of total over time, and this is increasing. And then we have the same-day zero DTE chart.
So basically, options trading based on leverage matches the description of the South Sea scheme and the tulip bubble.
https://www.tradersmagazine.com/vol-report/vol-report-0dte-flex-options-are-2025-heroes/
The Participation Signal
And in terms of participation, from people of various backgrounds, this also matches the description of the South Sea bubble as well as the Mississippi bubble.
In the text of Juglar, he says that you had all types of people trading in the South Sea bubble. You have the same thing in the Mississippi bubble.
You have nobles, bourgeois merchants, servants, soldiers, clergy, women—very prominently mentioned—and foreign speculators all trading side by side.
Conclusion: Rinse and Repeat
Conclusion: we have the proverbial rinse and repeat.