Let's talk about something that's taken the trading world by storm.
Zero-days-to-expiration options (or 0DTE for short) have completely changed how people trade. These expire at the end of the trading day. Today.
Think of it this way. You buy an option in the morning, and by 4 PM Eastern, it's either worth something or it's worthless. Game over.
The numbers are wild. Back in 2016, these options made up just 5% of all S&P 500 options trading. By mid-2023? That jumped to 43%, according to Cboe data. Charles Schwab reports about 1.5 million 0DTE options trade daily, accounting for nearly half of all S&P 500 options trades.
In 2022, the Cboe introduced daily expiration contracts for SPX options. Before that, you could only trade expirations on Mondays, Wednesdays, and Fridays. Now you can trade them every single day.
What Makes 0DTE Options So Different?
Time Decay Happens Incredibly Fast
Options lose value as time passes. We call this "theta" or time decay. With 0DTE options, this happens at lightning speed.
A regular option is like an ice cube on your counter melting slowly. A 0DTE option? That's an ice cube on a hot stove. Gone in minutes.
If you're selling options, you can make money incredibly fast. But if you're buying? Watch your position shrink before your eyes.
Gamma Risk in the Final Hour
Gamma measures how fast your option's sensitivity changes with price. With 0DTE options, especially in the last 30-60 minutes, gamma goes absolutely crazy.
Real example: It's 3 PM and you sold put options. The SPX is comfortably above your strike price. Then 3:45 PM hits and the market drops 20 points. Suddenly those "safe" options are in-the-money and you're losing money fast.
The Data Most Guides Won't Tell You
Historical price action analysis provides crucial insights for 0DTE trading. At 2:00 PM Eastern, the SPX closes within 0.2% of its current price about 65.6% of the time based on 180 trading days of data. The market has this tendency to "peg" itself to certain prices as the day goes on.
Why does this matter? Because if you're selling options (which is what most 0DTE traders do), you need to know actual probabilities. Not theoretical ones from some pricing model. Historical price action tells you more about what's likely to happen than any fancy mathematical model.
Strategies That Actually Work
Credit Spreads: The Most Popular Play
Cboe data shows 95% of 0DTE volume involves defined-risk strategies. Credit spreads lead the pack.
Bear Call Spread: You think the market won't go up much. Sell a call option at one strike price and buy another call at a higher strike. If the market stays below your short call, you keep the premium.
Bull Put Spread: Opposite scenario. Sell a put at one strike, buy a put at a lower strike. If the market stays above your short put, you win.
Real example: SPX is trading at 6,300. You sell a 6,350 call and buy a 6,355 call (a 5-point spread). You collect $0.60 in premium. Your max profit is $60 (minus commissions), max loss is $440. Your risk is defined.
Iron Condors: Playing Both Sides
An iron condor combines both spreads. You're saying "I think the market will stay in this range today." You put on both a bull put spread below the market and a bear call spread above it.
When you set your short strikes at around 0.15 delta, each side has roughly an 85% chance of expiring worthless. Combined, that gives you about a 70% probability of profit. But remember that gamma risk in the final 30 minutes.
The Risks You Must Understand
Gamma Explosions: Johns Hopkins researchers warn: "If you are not hedged properly, these swings could have an enormous negative impact."
Real example: December 18, 2024, when Fed Chair Powell announced fewer rate cuts. The SPX plunged and traders holding uncovered short positions faced catastrophic losses.
The Win Rate Trap: Many 0DTE strategies boast 80% win rates. But it's like "picking up pennies in front of a steamroller." You might win 20 trades in a row, then one trade wipes out everything. Proper position sizing and stop-loss discipline are essential, as backtests of SPX iron condor strategies have shown.
Day Trading Rules: If you open and close a 0DTE option on the same day, that counts as a day trade under FINRA rules. However, if the option expires worthless, it doesn't count as a day trade. Accounts under $25,000 are limited to three day trades in a rolling five-day period.
How to Start Without Blowing Up Your Account
Paper Trade First: Charles Schwab warns that 0DTE options aren't suitable for beginners. Paper trade for at least 30 days. Track your maximum drawdown and emotional reactions to losses.
Never Trade Naked Options: 95% of 0DTE traders use defined-risk strategies like spreads. Naked options have unlimited risk. Always use spreads.
Keep Positions Tiny: Risk 1-2% of your account per trade maximum. Professional traders often risk just 0.5% per trade. Because of rapid time decay, you can generate meaningful returns with small positions.
Avoid Trading Around Big News: FOMC announcements, CPI releases, jobs reports. Research shows 0DTE volume decreases during sharp market moves.
Have Exit Rules: Set profit targets and stop losses before entering. Many successful traders close spreads at 50-60% of maximum profit and use a stop loss at 2-2.5x their credit received.
Is 0DTE Trading Right for You?
0DTE options trading is not gambling, but it's not for everyone either. These instruments demand deep understanding of options Greeks (especially gamma and theta), active position monitoring throughout the trading day, strong emotional discipline, sufficient capital to handle losing streaks, and commitment to continuous learning.
0DTE trading grew from 5% to over 50% of SPX options volume in less than a decade because these tools serve real purposes: hedging event risks, expressing short-term views, and generating income. But beginners who jump in without preparation face high probability of substantial losses. Small mistakes become account-destroying disasters.
If you move forward, start small, focus on risk management, and remember: protecting capital always trumps chasing profits. In same-day options expiration, survival comes first.