What Is 0DTE? A Complete Guide to Zero Days to Expiration Options
Zero Days to Expiration options are same-day contracts that expire at market close. Learn why gamma acceleration, theta decay, and liquidity quality define every 0DTE outcome.
Zero Days to Expiration (0DTE) options are contracts that expire on the same trading day. They exist primarily on major indices and ETFs like SPY and QQQ, where daily expirations are available Monday through Friday.
Unlike multi-day options, 0DTE contracts operate under extreme time pressure. Two forces dominate:
Gamma Acceleration
Gamma measures how fast an option's delta changes relative to the underlying price. As expiration approaches, gamma spikes — particularly for at-the-money strikes. This means small price moves in SPY or QQQ can cause outsized percentage swings in option premiums.
A $1 move in SPY near the close can generate 200–400% returns on a well-positioned 0DTE contract — or wipe it out entirely.
Theta Decay
Theta represents time decay — the rate at which an option loses value as expiration nears. For 0DTE options, theta is at its absolute maximum. A contract worth $1.50 at 10:00 AM might be worth $0.30 by 2:00 PM even if the underlying hasn't moved. This relentless decay is why holding 0DTE positions without a clear edge is a losing proposition.
Why Liquidity and Spread Quality Matter
In fast-moving 0DTE markets, the bid-ask spread can be the difference between a profitable trade and a losing one. Wide spreads mean you pay more to enter and receive less when you exit. High-volume strikes with tight spreads allow traders to execute efficiently.
Consider two SPY call options:
- Strike A: Bid $1.20 / Ask $1.25 (spread: $0.05)
- Strike B: Bid $1.10 / Ask $1.30 (spread: $0.20)
Strike A gives you a $0.05 disadvantage on entry. Strike B costs you $0.20 before the trade even moves. Over dozens of trades, spread quality compounds dramatically.
Why Most Traders Fail at 0DTE
The combination of extreme gamma, rapid theta decay, and variable liquidity creates an environment where emotion-driven decisions are punished severely. Without structured criteria for contract selection, most traders end up chasing momentum, holding losers too long, or entering illiquid strikes where execution quality suffers.
0DTE trading rewards preparation and structure. It does not reward gut-feel improvisation.
Risk Disclosure: Options trading involves substantial risk of loss and is not suitable for all investors. Past performance does not guarantee future results.