Published on: 2026-02-05
Zero days to expiration (0DTE) options are options traded on the day they expire. Their growth has changed how equity risk is expressed, priced, and hedged in the US market, because positioning and hedging can reset within hours rather than weeks.
The scale is no longer niche. In 2025, total US-listed options volume topped 15.2 billion contracts, with average daily volume around 61 million. In S&P 500 Index (SPX) options, 0DTE averaged about 2.3 million contracts a day and represented 59 per cent of total SPX volume.
0DTE now represents a majority share of SPX options volume, but gross volume is not the same as net dealer exposure.
Intraday volatility impact tends to be episodic, it is more likely when flow is one-sided and liquidity is thin.
For traders, the main challenge is risk compression: small timing errors can matter more than the market view.
0DTE refers to “zero days to expiration,” describing options traded on their expiration day. As time to expiry decreases, gamma (how fast delta changes) can rise sharply, so delta can change quickly even after small moves in the underlying. This makes hedging more path-dependent and time-sensitive, especially around heavily traded strikes.
The most actively traded 0DTE options are on major, daily-expiring indices and exchange-traded funds (ETFs), including SPX (S&P 500 Index) and SPY, QQQ, NDX, XSP, and RUT. In practice, 0DTE options often function as intraday convexity tools rather than multi-day risk-transfer instruments.
They are frequently used around catalysts such as Consumer Price Index (CPI) releases, Federal Open Market Committee (FOMC) decisions, large Treasury auctions, major earnings announcements, and late-day moves around heavily traded strikes.
| Date / period | Adoption marker | What it signalled |
|---|---|---|
| 2016 | ~5% of SPX options volume | Early stage product, mostly Friday expiries |
| Aug 2023 | ~50% share of SPX options volume | 0DTE becomes dominant in index options flow |
| May 2025 | 0DTE share ~61%, retail estimated ~54% | Retail participation rebounds |
| Full year 2025 | 2.3M contracts average daily volume (ADV), 59% of SPX volume | 0DTE becomes a baseline hedging and trading layer |
| Aug 2025 | ~62% share, retail estimated ~53% | Record share, broad participation |
| Nov 2025 | 2.8M SPX 0DTE ADV record | Peak intensity in same-day SPX activity |
There are repeatable conditions where 0DTE is more likely to contribute to volatility spikes, even if it is not the root cause:
One-sided demand for protection. If traders aggressively buy same-day puts into a falling market, dealers can be pushed short gamma, creating procyclical hedging.
Liquidity shocks. On days when futures liquidity is thin, the same hedging demand represents a larger share of tradable depth, making feedback loops more potent.
Late-day strike battles. High open interest near key strikes late in the session can produce sharp intraday reversals when the index crosses the strike and hedging needs flip.
Macro catalyst clustering. When major releases and supply events fall in the same session, 0DTE becomes a high-speed way to express views, increasing turnover and the probability of abrupt repricing.
Exchange commentary and academic work point to a nuanced conclusion: markets have become more integrated with 0DTE activity, but average effects can be small, with the biggest impacts appearing in short-gamma episodes and other concentrated conditions.
When market makers hold long gamma positions, their hedging activity is typically countercyclical: they sell during rallies and buy during selloffs, which can dampen intraday price movements.
Conversely, when gamma is short, hedging becomes procyclical, as market makers buy into rallies and sell into selloffs, thereby amplifying price fluctuations.
0DTE options carry exceptionally high gamma, especially around at-the-money strikes, so their delta can change sharply even on very small moves in the underlying. As the clock runs down, that sensitivity often compels dealers to rebalance hedges more frequently and more forcefully, which can concentrate volatility intraday and contribute to strike “pinning” or abrupt reversals around key levels.
Another crucial nuance is that gross volume does not equal net exposure. A heavily traded strike can be mostly “noise” in net terms if buys and sells offset each other. Some exchange level analysis stresses that it is the balance between buying and selling that determines net gamma risk, not the headline notional.
The public narrative often treats 0DTE as a speculative craze. The flow is more mixed.
Retail participation is sizable. In May 2025, retail was estimated at about 54 per cent of SPX 0DTE volume, and Cboe estimated retail at about 53 per cent in August 2025.
Institutional use cases are straightforward. Institutions use 0DTE to fine-tune exposure around macro events, implement defined-risk spreads, or neutralise intraday drawdown risk without paying for unused time value.
The balance matters more than the identity. Balanced two-way usage is one reason exchange-level analysis often finds limited evidence of persistently outsized net dealer exposure relative to underlying liquidity.
This is also why claims that 0DTE “must” suppress or “must” amplify volatility are often wrong. It can do either depending on whether the market is in a long gamma or short gamma state, and whether flows are one-sided or offsetting.
This section is educational, not a recommendation. Options are complex and can be high risk, especially in 0DTE where exposures can change quickly. Losses can exceed the initial premium when selling options, and broker controls can affect how positions are managed.
0DTE options can be worth trading when they serve a clear purpose and the structure fits the instrument’s short time horizon. Same-day options compress risk into hours, which can make them a defined-risk tool for a single session, but also a fast way to accumulate repeated small losses or one large operational mistake.
The only two rational use cases:
Portfolio managers and active traders use 0DTE to buy short-lived convexity into known risk windows, such as CPI, Fed days, or a fragile tape. The point is not to “win big.” The point is to cap intraday drawdown with a premium that is explicitly disposable.
If a trader has a view that realized volatility over the next few hours will differ from what the market is pricing, 0DTE can express it efficiently. The keyword is defined. Spreads, butterflies, and iron structures are generally more robust than naked short options because they prevent a small move from becoming an account-level incident.
Near-the-money 0DTE contracts can shift from neutral to highly directional on small underlying moves. A position that looks controlled early in the session can become exposed within minutes, especially in the last hour.
Quoted spreads can look tight, then widen abruptly during fast markets, around data releases, or near the close. That turns “small risk” trades into large realized losses through slippage, not just price direction.
Same-day implied volatility can spike before catalysts and collapse immediately after. Traders can be right on direction but lose money if implied volatility falls faster than the underlying moves.
Selling naked calls or puts in 0DTE is effectively selling a short-lived disaster policy. Most days look fine, but a single outsized move can overwhelm weeks of small gains, particularly when liquidity thins.
Brokers often tighten risk limits on expiration day, including higher intraday margin, reduced leverage, and forced position closures if exposure breaches thresholds. The risk is not only market loss but also the loss of control over the exit due to firm-level risk controls.
The most important forward-looking question is not whether SPX 0DTE rises from 60 per cent to 65 per cent. The question is whether near-daily expiries become the norm in large single stocks, where idiosyncratic gaps, earnings shocks, and concentrated ownership structures can interact more violently with gamma hedging.
In late January 2026, Nasdaq disclosed SEC approval for Monday and Wednesday expiries for a defined set of “Qualifying Securities,” including the Magnificent Seven, Broadcom, and the iShares Bitcoin Trust ETF, allowing these names to trade additional expiries beyond the typical Friday cadence.
If this trend continues, two primary implications emerge.
More idiosyncratic volatility hotspots. Index flow disperses risk across a basket. Single stock flow concentrates it.
More frequent event hedging. Earnings and product cycles create recurring catalysts that naturally fit short-horizon options, increasing turnover and the likelihood of localised liquidity pockets.
They are better understood as a transmission mechanism. 0DTE can shift volatility into intraday windows by changing dealer gamma states and hedging urgency. Evidence from exchange-level analysis suggests average net dealer exposure is often small, but episodic amplification can occur when positioning turns short gamma.
VIX targets 30-day expected volatility, not today’s realized volatility. Intraday swings driven by event risk and same-day positioning can rise without lifting 30-day implied volatility meaningfully, especially when longer-dated volatility supply remains ample.
It depends on dealer gamma. Long gamma hedging tends to counteract moves; short gamma hedging tends to reinforce them. Balanced two-way customer flow can keep net gamma small even when gross volume is large, limiting average impact.
Both retail and institutions participate. Retail has represented roughly half or more of SPX 0DTE volume in some snapshots, while institutions use 0DTE for event hedging and tactical exposure. The key variable for market impact is net positioning, not identity.
Liquidity and timing risk dominate. Greeks change rapidly, spreads can widen abruptly, and brokers may liquidate positions near the close if exercise or assignment risk cannot be supported. Margin and day trading rules can also become binding faster than expected.
0DTE options have become a core layer of US equity market structure, not a sideshow. The headline growth is clear: in 2025, SPX 0DTE averaged about 2.3 million contracts a day and made up 59 per cent of SPX volume, with later months pushing the share above 60 per cent.
The deeper point is subtler. 0DTE does not need to raise average volatility to reshape how volatility behaves. By concentrating convexity into the trading day, it can compress, shift, and occasionally intensify price action around key strikes and key hours. The market’s stability, therefore, hinges less on raw volume and more on positioning balance, liquidity conditions, and the intraday gamma state.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
1) NASDAQ Disclose SEC Approval
