0DTE options

0DTE options ("zero days to expiration") are options contracts traded on the same day they expire. Because the most active index products now have an expiration every trading day, there is always a contract expiring today for those underlyings.

How it works

Cboe lists S&P 500 index (SPX) options with expirations on every weekday, a schedule completed in 2022, and daily expirations also exist for major ETFs such as SPY and QQQ. Single stocks generally have weekly expirations at most, so 0DTE trading in individual names is limited to their expiration days.

Key mechanics:

• SPX options are European style and cash-settled: no shares change hands and they cannot be exercised early.
• SPY and QQQ options are American style and settle into shares, so assignment risk applies.
• Greeks are extreme. With hours left, gamma near the money is very high and theta erodes time value by the minute.

Why it matters for traders

0DTE options let traders make or hedge very short-term bets with small upfront cost, and they have become a large share of SPX options volume. They are popular around scheduled intraday events such as CPI releases, Fed decisions and major earnings that move the index.

The same features make them unforgiving. A position can go from worthless to many times its cost, or the reverse, in minutes. There is also an ongoing debate about whether dealer hedging of heavy 0DTE flows can amplify or dampen intraday index moves.

Example

Suppose SPX trades at 6,000 at 10:00 a.m. on a Wednesday. A trader buys one 6,020 call expiring that day for $4.00. SPX options use a $100 multiplier, so the cost is $400.

• If SPX settles at 6,035 at the close, the call is worth $15.00, or $1,500 in cash. Profit: $1,100.
• If SPX settles at or below 6,020, the call expires worthless. Loss: $400.
• If SPX sits at 6,010 by 2:00 p.m., time decay alone may have cut the call to well under $1.00.

FAQ

Are 0DTE options riskier than regular options?

For buyers the maximum loss is still the premium, but the odds of losing all of it are high. For sellers, high gamma means losses can mount very quickly.

Can you trade 0DTE options on individual stocks?

Only on days when that stock has an expiration, usually Fridays for names with weekly options. Daily expirations are mainly offered on major indexes and index ETFs.