0DTE, short for "zero days to expiration," option contracts expire on the same day they are opened.
Stocks, ETFs, and indexes with options have a minimum of one expiration per month – typically the 3rd Friday of each month, as shown here:
Some popular stocks and ETFs will also offer weekly expirations, with one or more option expiration cycles every week.
Any stock, index, or ETF offering options will have at least one 0DTE contract expiration per month because all options eventually expire and become 0DTE options on their final trading day, whether they’re a weekly, monthly, or quarterly contract. Ticker symbols with daily contracts have options available Monday - Friday for 0DTE trading.
For example, SPY offers daily, weekly, and monthly options for the near future:
What Does 0DTE Mean?
Days to expiration (DTE) describes how many days an option has remaining until it expires. All option contracts expire at some point, and eventually, each option is “zero” days to expiration, meaning it expires that day when the market closes.
0DTE options are characterized by their extremely short time frame, which makes them unique compared to traditional options that might have days, weeks, or even months until expiration. 0DTE contracts are used to day trade options, so positions are opened and closed or held until expiration on the same day.Â
How do 0DTE options work?
0DTE options work like all other options. The primary difference is their condensed timeframe. Traders can choose to exit their position before the market closes or hold the contract through the end of the trading day.
Because of the limited extrinsic value of 0DTE options, traders may close their positions by selling to close or buying to close their original positions. Most day traders seek to capitalize on short-term market moves (or minimal market movement if they’re selling neutral strategies such as iron condors and iron butterflies).
However, because 0DTE time decay is non-linear and accelerates exponentially in the afternoon after 3:30 p.m. EST, some traders may prefer to hold the position through expiration.
Index options such as SPX are cash-settled, so there is no risk of assignment and holding shares overnight.
Why are 0DTE options so popular?
0DTE options have become extremely popular since Cboe released daily contracts for SPX in 2022. Traders seeking short-term opportunities in the market prefer the quick exposure and instant results of 0DTE, without the overnight risk of longer-dated options.
As the chart below shows, 0DTE volume has grown every year and now accounts for nearly half of all SPX options trades.
What are the benefits and risks of 0DTE options?
The main benefits of 0DTE options include quick turnaround with no overnight risk, accelerated theta decay, and high volume and liquidity. As more ticker symbols offer 0DTE contracts, traders will continue to have a variety of choices when selecting what to trade. Index options and equity options both offer unique benefits to traders as well.
There are a few risk when trading short-duration option contracts. Most notably is their sensitivity to quick price movement, liquidity issues with certain tickers, and it’s difficult to hedge and manage trades intraday.
