Theta Decay in 0DTE: The Clock Is Always Running
Time decay is at its maximum on expiration day. Understanding how theta accelerates through the session helps avoid the most common 0DTE mistake.
In options trading, time is not your friend — it's your opponent. For 0DTE traders, this is amplified to the extreme.
How Theta Works on Expiration Day
Theta represents the daily time decay of an option. For a 30-day option, theta might be $0.03 per day. For a 0DTE option, the entire remaining time value must decay to zero by 4:00 PM ET.
This creates a decay curve that accelerates through the day:
| Time Window | Theta Impact |
|---|---|
| 9:30–11:00 AM | Manageable. The option still has runway for directional moves to play out. |
| 11:00 AM–1:00 PM | Accelerating. Positions that haven't moved favorably begin losing value visibly. |
| 1:00–2:30 PM | Steep. Out-of-the-money options start dying rapidly. |
| 2:30–4:00 PM | Terminal. Options that aren't in the money are decaying to near-zero. Every minute counts. |
The Most Common Theta Mistake
Traders buy a 0DTE call at 10:00 AM for $1.50. By noon, SPY hasn't moved much, and the call is worth $0.90. The trader thinks: "It hasn't gone against me, I'll hold."
By 2:00 PM, the call is $0.40. By 3:00 PM, $0.10.
The underlying didn't move against the trade. Theta ate the premium.
Trading With Theta, Not Against It
Experienced 0DTE traders factor theta into every decision:
- They set time-based exits, not just price-based ones
- They recognize that a position losing to theta in the late morning is unlikely to recover
- They understand that sellers benefit from theta while buyers fight against it
How Scoring Accounts for Time Value
Our implied volatility component helps identify contracts where the premium reflects fair time value versus inflated time value. Overpaying for time value on a 0DTE contract — where all time value decays by close — is one of the most expensive mistakes a trader can make.
Risk Disclosure: All options are affected by time decay. 0DTE options experience the maximum rate of decay. This content is educational and not financial advice.