0DTE Options and the Dealer-Gamma Story
A structural change in the options market deserves its own page. Zero-day-to-expiration (0DTE) options — contracts that expire the same trading session in which they trade — have gone from a curiosity in 2020 to the dominant flow on S&P 500 index products. Cboe reports 0DTE at roughly 59% of total SPX option volume in 2025, up from about 5% in 2016, with daily expirations now listed Monday through Friday. That much is not in dispute.
What the flow does to the index is very much in dispute, and you should know that before you adopt any of the conclusions built on it. The popular mechanic is gamma. A 0DTE option has almost no time value but enormous gamma right at the strike — its delta swings from near zero to near one over a handful of S&P points. On the standard telling, the public net-buys these contracts, the market maker on the other side is left short gamma and must hedge dynamically (buying the underlying as the index rises through a heavily traded call strike, selling as it falls through a put strike), and that mechanical hedging is what produces violent, newsless afternoon swings. Sell-side strategists repeat this daily, and it is intuitive.
Cboe’s own data says otherwise, and it is the best data anyone has because the exchange sees the flow. Its market-impact study finds customer 0DTE flow is “remarkably balanced between buy vs. sell” rather than one-sided; that market-maker net gamma exposure runs $170–670 million intraday, which is 0.04% to 0.17% of daily S&P futures liquidity; and that there is “no discernible market impact from 0DTE option trading, with SPX index intraday volatility and price patterns in line with historical averages” and no uptick in intraday gap moves. Treat Cboe as an interested party — it lists the product — but note that the burden of proof sits with the people asserting an effect, and they have not carried it.
The honest position is therefore narrower than the headline, and it still leaves you with three things to do. First, ignore intraday charts on index products. Whether the afternoon chop is dealer hedging or ordinary noise, it is not information you can act on, and the two explanations recommend the same behavior. Second, buy longer-dated strikes when you need genuine downside insurance: a 0DTE put is a lottery ticket on one session, not a hedge, and even a one-month put is a different instrument from the one the day-trading crowd is pricing. Third, do not sell 0DTE premium because the win rate looks magnificent. This one does not depend on the gamma debate at all — it is the expected-value argument from section “Option Greeks: Impact of Volatility on Options” with the leverage dial turned to maximum. You are underwriting a tail on the single day it can show up, with no time to adjust and no overnight to recover in.