Zero days to expiration or 0DTE options are contracts with less than one day to expiration—in other words, same-day expiration. Although most common with day traders trying to capture rapid intraday moves, asset managers have steadily adopted 0DTE strategies. Most commonly, institutions use them for premium harvesting (call and put writing) or cheap, precise portfolio hedges.
Given how liquid the 0DTE option chain has become, buyers of these contracts can enter and exit trades with incredibly tight bid-ask spreads. We will take a deep dive into the cause and effect of 0DTE options on daily market operations, their explosive growth, and the risks involved.
The Rise of 0DTE: 59% of SPX Volume
CBOE (Chicago Board Options Exchange) debuted SPX (S&P 500) index options in 1983. The rapid adoption of options into asset managers’ portfolios grew exponentially. There was so much demand that in 2005, CBOE introduced SPXW or weekly option expirations. From there, Monday and Wednesday expirations were introduced, and finally, in 2022, Tuesday and Thursday expirations were added—creating a market where options expire every single trading day.
The introduction of daily expirations acted as rocket fuel for options volume. In 2016, 0DTE options made up roughly 5% of total SPX volume. By 2021, that number had grown to 35%. Following the launch of daily expirations in 2022, the volume share jumped to 44%.
According to the Cboe 2025 State of the Options Industry report, 0DTE options in SPX averaged 2.3 million contracts daily, accounting for a massive 59% of total SPX volume [1].
Retail vs. Institutional Volume
A major misconception is that retail day traders are entirely to blame for the 0DTE frenzy. While retail adoption has surged—fueled by commission-free trading platforms—they are not the only players in the space.
Cboe data from 2025 indicates that retail flow makes up an estimated 50% to 60% of 0DTE trading [2]. However, the remaining 40% to 50% is driven by institutional investors, market makers, and algorithmic trading desks using these short-dated contracts for precision hedging and yield generation.
How Market Makers Hedge 0DTE
The role of a market maker is to provide liquidity to the markets while profiting from the bid-ask spread. A market maker isn’t required to hedge, but they will do so in order to stay delta-neutral. Delta is defined as the theoretical value of an options premium price in a $1 move of the underlying asset. Gamma is the second-order derivative of delta—it measures the rate of change of an option’s delta for every point move in the underlying.
Market makers take the opposite side of your trade. If you buy a call option with a 30 delta, the market maker who sold you that option will need to buy 30 shares of the underlying to stay delta-neutral. It works the same way when you write options. Market makers will sell the equivalent delta of the option from their inventory.
Because 0DTE options expire on the same day, their gamma profile is incredibly sensitive. As these contracts move closer to being in-the-money (ITM), their delta changes rapidly, forcing market makers to hedge much more aggressively than they would for longer-dated options.
0DTE Effects on Greeks (Gamma Squeezes)
Day traders like to buy 0DTE options because of their inexpensive pricing (low premiums due to rapid theta decay). But because they expire the same day, traders need large, immediate moves in the underlying stock for the payoff to meet the risk.
This dynamic is the basic premise behind an intraday gamma squeeze. Here is how it works:
- Market makers need to stay delta-neutral at all times.
- When the share price of SPY rises, out-of-the-money 0DTE call options suddenly move closer to being in-the-money.
- This rapidly increases the delta and gamma of those options.
- As the options approach a delta of 1, market makers are forced to buy more shares of the underlying to remain delta-neutral.
- When SPY continues to rise, more traders buy calls, forcing dealers to buy millions of shares in a short period of time.
This causes a positive feedback loop into the market, resulting in a violent gamma squeeze. The rapid adoption of 0DTE options provides significant room for these types of intraday market dislocations.
Common Misconceptions
Aside from the retail-only myth, another large misconception involves the put-to-call ratio being skewed by 0DTE activity.
In a rising interest rate environment, the frequency of exercising deep in-the-money puts changes. A trader will buy a 100-delta deep in-the-money put option to take advantage of the Greek Rho (price sensitivity to interest rates). This is an arbitrage strategy that has grown in popularity thanks to 0DTE liquidity.
This activity can heavily skew the intraday put/call ratio, making it seem as if traders are overwhelmingly bearish on the underlying market, when in reality, it is simply an institutional arbitrage trade.
In Conclusion
With 0DTE options now taking up nearly 60% of SPX option volume daily, they have permanently altered intraday market mechanics. The risks of flash crashes and exaggerated intraday moves linger in the background while traders attempt to capitalize on these cheap contracts. To trade them successfully, you must understand the underlying order flow and the mechanics of market maker hedging.
References:
[1] Cboe Global Markets, “The State of the Options Industry: 2025” (Jan 2026)
[2] FOW, “Cboe points to retail flow as zero-day options grow” (May 2025)
