0DTE Options Trading Guide: A Comprehensive Analysis of Same-Day Expiry High-Risk Strategies

0DTE options (Zero Days to Expiration options), which expire on the same day they are traded, have attracted a large number of investors with their extremely high leverage and rapid profit potential. At the same time, their high-risk characteristics have drawn attention from regulators and market analysts. This article provides an in-depth analysis of the mechanisms, core risks, and main trading strategies of 0DTE options.

What are 0DTE Options

0DTE options refer to options contracts whose expiration date is the same as their trading day. The "DTE" in "0DTE" stands for "Days to Expiration." When this number is zero, it means the option will expire at the close of the trading session. These are also known as "expiry day options" or "zero-day options," named for their extremely short life span.

The Market Development of 0DTE Options

In recent years, trading volumes for 0DTE options have continued to hit record highs. According to market research, the share of 0DTE options trading in S&P 500 index (SPX) options surged from under 17% in 2020 to over 56% in the first half of 2025.

Differences Between 0DTE Options and Traditional Options

Compared to traditional options (which typically have several weeks or months until expiration), 0DTE options have these notable features:

Almost Zero Time Value: With only a few trading hours left, the option's time value is minimal; prices are mainly determined by intrinsic value.

Extremely High Leverage: A small amount of capital can control a large position in underlying stocks; $1 of premium might correspond to a notional value hundreds of times greater, with risk and return alike magnified.

Sharp Price Fluctuations: Small price changes can cause significant swings in the option's value, which can even become worthless within minutes.

Suitable for Intraday Trading: Traders can open and close positions within the same trading day, with no need to hold overnight.

The Four Core Risks of 0DTE Options

While 0DTE options offer opportunities for quick profits, their risk level is far higher than traditional options. Investors must fully understand the following four core risks before participating.

Rapid Time Value Decay (Theta Risk)

Time decay, represented by the Greek letter Theta, is a key concept in options trading. For 0DTE options, Theta is extremely high, meaning the option's value can erode rapidly every hour or even every minute. If the market does not move sharply in the expected direction, the option’s value may fall to zero in a short period, causing the investor to lose the entire premium.

According to option pricing models, as the time to expiration approaches zero, time value decays at an accelerating, exponential rate. This means that even a slight favorable move in the underlying asset’s price may not be enough to offset the rapid loss in time value, resulting in losses.

Gamma Risk: The Double-Edged Sword of Price Sensitivity

Gamma represents the rate of change in an option’s Delta (its price sensitivity to the underlying). 0DTE options generally have very high Gamma, especially when at-the-money or near-the-money. This makes the option price extremely sensitive to tiny moves in the underlying asset.

High Gamma offers both opportunity and risk:

• Favorable scenario: If the underlying asset moves in the anticipated direction, profits can grow rapidly.
• Unfavorable scenario: If the asset moves against the position, losses can also mount very quickly—and with so little time left, there’s almost no chance to recover.

Some Wall Street analysts note that in extreme market conditions, zero-day options can amplify a 5% single-day SPX drop to a 25% loss on the options.

Execution Risk and Liquidity Risk

Liquidity in the 0DTE options market might not match that of longer-term options, especially for out-of-the-money strikes. Insufficient liquidity can result in:

• Wider bid-ask spreads: Investors might not be able to trade at desirable prices, increasing transaction costs.
• Slippage risk: In fast-moving markets, the actual transaction price may deviate significantly from the intended price.
• Difficulty closing positions: In volatile markets, it can be impossible to find a counterparty for your trade, forcing you to hold to expiration.

Additionally, execution speed is critical. In 0DTE trading, a delay of even a few seconds can mean missing the best entry or exit.

The Market Volatility Amplification Effect

0DTE trading itself has become a major source of market volatility. When a large number of investors are trading 0DTE options at once, market makers’ hedging activities can further drive swings in underlying asset prices, creating a positive feedback loop.

During major macroeconomic releases or policy changes, spikes in 0DTE trading often sharply increase implied volatility on the index.

Popular 0DTE Options Trading Strategies

Despite their high risk, 0DTE options still have strategic value. Here are several mainstream strategies and the situations in which they are most applicable.

Buying Single Calls or Puts

This is the most straightforward 0DTE strategy, suited for investors expecting clear, strong directional movement during the day.

How it works:

• Buy a call option: Expect the underlying asset to rise.
• Buy a put option: Expect the underlying asset to fall.

Advantages:

• Potential profit is unlimited for calls, or at least substantial for puts.
• Maximum loss is limited to the option premium paid.
• Simple to implement; good for beginners to grasp basic option concepts.

Risks:

• If the market doesn’t move as expected, rapid time-value decay can wipe out the entire premium.
• Requires very accurate direction forecasting and timing.

Tip: This strategy is suitable before major announcements such as economic data releases or company earnings reports, which are expected to trigger volatility.

Credit Spread Strategy (Also Known as Selling Vertical Spreads)

Vertical spread strategies are among the most popular risk-defined 0DTE strategies. About 95% of 0DTE volume uses such risk-defined tactics.

How it works:

• Bear Call Spread: Sell a lower strike call and buy a higher strike call, expecting the asset won't rise significantly.
• Bull Put Spread: Sell a higher strike put and buy a lower strike put, betting the asset won’t fall much.

Advantages:

• Collect option premium as potential profit.
• Maximum loss is limited and known.
• Suitable for sideways or mildly trending markets.

Risks:

• Maximum profit is capped at premium received.
• If the underlying asset moves sharply against you, losses are incurred.

Iron Condor Strategy

The iron condor combines bear call and bull put spreads. It's a popular 0DTE strategy among advanced traders.

How it works:

Simultaneously set up two vertical spreads:

1. Sell a bull put spread (lower strike range)
2. Sell a bear call spread (higher strike range)

This strategy aims to collect premium from both sides if the market remains within a defined range.

Advantages:

• High probability of profit in low-volatility, range-bound markets.
• Both risk and reward are well defined and limited.
• No need to pick the exact market direction.

Risks:

• If the underlying breaks outside the defined range, losses occur.
• Higher transaction costs (four option contracts involved).
• Requires close monitoring and timely adjustment or closing.

Scalping

Scalping seeks to capitalize on small intraday price movements through fast entries and exits, pursuing multiple small gains.

How it works:

Traders watch price action closely; when an opportunity arises, they buy options and then quickly close the positions—sometimes within just a few minutes.

Risks:

• Requires exceptionally high market awareness and trading discipline.
• Transaction costs can accumulate rapidly (commissions and spreads).
• High psychological pressure that can lead to mistakes from emotional swings.

Key Principles of Risk Management

Strict risk control is the foundation of success in 0DTE trading. Below are key principles every investor should follow.

Set Clear Stop-Loss Levels

Before opening a position, predefine your maximum acceptable loss and enforce stop-loss discipline strictly. With 0DTE prices changing rapidly, it’s advised to use stop-loss orders for automatic exits, so you don’t miss the best opportunity by hesitating.

Control Position Size

Never put all your capital into a single 0DTE trade. Generally, risk on any single trade should be kept very low, so that even a streak of losses doesn’t do serious harm to your portfolio.

Avoid Excessive Leverage

Although 0DTE options offer high leverage, overusing it can lead to outsized losses. Choose position sizes carefully, according to your personal risk tolerance.

Continuously Monitor the Market

0DTE options do not suit a "set-and-forget" investing approach. You need to monitor positions constantly during the trading session, and be ready to adapt or close positions in response to market changes.

How to Trade 0DTE Options on Longbridge Securities

Longbridge Securities offers options trading for the US market, allowing clients to trade a variety of options—including 0DTE—on its platform.

Features of Options Trading at Longbridge Securities

As a next-generation digital securities platform, Longbridge offers these advantages for options traders:

• Ultra-low latency trading: Market data latency of just 10 milliseconds, giving traders up-to-the-minute data.
• Comprehensive market coverage: US stock options supported, including major indices and single-stock options.
• Professional trading tools: Access to options chain quotes, Greek data, strategy builder tools, and more.
• Regulatory compliance: Licensed by the Hong Kong SFC (Type 1, 2, 4, and 9), providing a compliant and secure trading environment.

Notes on Options Trading

When trading 0DTE options, investors should keep in mind:

1. Understand product risk: Options are complex financial instruments. Make sure you fully understand how they work and the risks before trading.
2. Suitability requirements: Options trading typically requires higher investing experience and risk tolerance.
3. Pay attention to trading hours: 0DTE options expire at the end of the trading session on expiry day. Mind the specific expiry time to avoid accidental overnight positions.
4. Understand fee structures: Be aware of commissions, exercise fees, and other trading costs—these can significantly affect overall returns, especially for frequent traders.

The Market Impact and Regulatory Concerns of 0DTE Options

With the rapid growth in 0DTE trading volume, there’s been widespread discussion about their market impact.

Impact on Market Volatility

Research shows that 0DTE options trading is closely linked to market volatility (as measured by the VIX). When volatility rises, 0DTE options become more attractive; increased activity in turn drives volatility higher, which can have a significant effect on index price swings.

Regulatory Attitude

While 0DTE options add liquidity and short-term hedging tools to the market, their speculative nature and potential risks for retail investors have raised regulatory concerns. Some analysts warn that, under extreme moves, large 0DTE positions could amplify systemic risk. Investors should stay vigilant and pay attention to regulatory updates.

Frequently Asked Questions

What Type of Investors are 0DTE Options Suitable For?

0DTE options are best for highly experienced options traders with high risk tolerance and the ability to monitor the market throughout the session. Due to their extreme risk and rapid value decay, they’re not recommended for beginners or low-risk tolerance investors.

What is the Main Difference Between 0DTE and Regular Options?

The most important difference is duration: 0DTE options expire on the day they're traded, with almost zero time value, and their price is primarily driven by intrinsic value. Regular options typically have longer expiries, with a greater proportion of price as time value. Additionally, 0DTE options have much higher Gamma and Theta, resulting in more violent price swings.

How Much Capital is Required to Trade 0DTE Options?

In theory, the minimum needed is just the premium to buy a 0DTE option. However, from a risk management perspective, it’s recommended to have enough capital for diversification and to strictly control the size of each trade relative to your total capital. More complex strategies—like iron condors—might require additional margin.

Can 0DTE Options be Held Overnight?

No. 0DTE options are defined by expiring the same trading day. Positions must be closed before market close or left to expire. If not closed, in-the-money options will be exercised automatically and out-of-the-money options will expire worthless.

When Should 0DTE Trading Be Avoided?

Avoid trading 0DTE options when: the market is extremely volatile and directionless; you lack time for monitoring; you’re emotionally unprepared; or you don’t have a clear trading plan and risk management strategy in place.

Conclusion

As an ultra-short-term instrument, 0DTE options bring more liquidity and trading opportunities, but also come with extremely high risk. Rapid time decay, high Gamma sensitivity, execution risk, and the tendency to amplify volatility make these instruments suitable only for experienced, disciplined traders.

For those interested in 0DTE trading, the most important thing is to have rigorous risk management: set clear stop-losses, control position size, avoid excessive leverage, and monitor the market constantly. Never view 0DTE options as a path to get-rich-quick—they are a high-risk trading strategy demanding professional knowledge and strict discipline.

Your choice of tool depends on your investment goals, risk tolerance, market outlook, and experience. Whatever you choose, it’s crucial to fully understand how it works, its risks, and trading rules, and set up a sound risk management plan. You can learn more about investing by visiting the Longbridge Academy or by downloading the Longbridge App.