0DTE (Zero Days to Expiration) options are options contracts that expire on the same trading day they are traded. Once available only on monthly expiration Fridays, daily expirations on major indices now make 0DTE trading possible every market day.

The 0DTE Explosion

Since CBOE introduced daily SPX expirations in 2022, 0DTE trading volume has exploded:

• SPX 0DTE now represents 40-50% of all SPX options volume
• Notional exposure often exceeds $1 trillion daily
• The market structure implications are profound

Why 0DTE Behaves Differently

With hours (or minutes) until expiration, the Greeks behave at extremes:

Theta (Time Decay)

$\Theta_{0DTE} \rightarrow \infty \text{ as } T \rightarrow 0$

Time decay accelerates dramatically. An option worth $2.00 at 10am might be worth $0.20 by 2pm—even with no price movement.

Gamma (Price Sensitivity)

Near-the-money 0DTE options have extreme gamma:

$\Gamma = \frac{e^{-d_1^2/2}}{S \sigma \sqrt{2\pi T}}$

As $T \rightarrow 0$, gamma spikes for ATM strikes. A 10-point SPX move can turn a $0.50 option into$10.00.

Delta (Directional Exposure)

Delta becomes binary near expiration:

• ATM options: delta ≈ 0.50, but shifting rapidly
• Slightly OTM: delta → 0 quickly
• Slightly ITM: delta → 1.00 quickly

0DTE and Market Structure

The prevalence of 0DTE creates unique market dynamics:

Intraday Gamma Walls

Large 0DTE open interest at given strike(s) creates intraday support/resistance:

Time	Gamma Effect
Market open	Gamma distributed, moderate to low effect
Midday	Gamma begins concentrating at key strikes
Final hour	Extreme gamma at ATM, strong pinning

Dealer Hedging Intensity

With extreme gamma, dealers must hedge more frequently and in larger size:

1. Price approaches high-OI strike
2. Dealer gamma exposure spikes
3. Hedging creates buying/selling pressure
4. Price pins (in the case of positive GEX) or whipsaws through that level (in the case of negative GEX)
5. Cycle repeats at next strike

Volatility Seasonality

0DTE creates distinct intraday volatility patterns:

• 9:30-10:30 ET: High volatility as positions establish
• 11:00-14:00 ET: Often subdued (dealers in control)
• 14:30-16:00 ET: Volatility rises as gamma concentrates

0DTE Impact on Exposure Models

0DTE options create challenges for exposure calculations:

1. Rapid OI changes - Positions open and close intraday
2. Extreme Greeks - Small price changes create large exposure swings
3. Expiration mechanics - 4pm cash settlement vs. equity close

VannaCharm tracks 0DTE-specific exposure to capture these dynamics.

Index vs. Stock 0DTE

Note that most of the behaviours and dynamics described here pertain to index options (and their corresponding ETFs) (e.g., SPX, SPY, NDX, QQQ) rather than single-stock options. Options on individual stocks are at the most weekly expirations, and thus do not exhibit the same extreme time decay and gamma characteristics as daily index options, outside of Friday expirations.

Related Concepts

• Gamma Exposure (GEX) - Amplified in 0DTE
• Charm Exposure - Extreme time decay effects
• Negative Gamma Environment - Often triggered by 0DTE flows