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0DTE: What Investors Should Know About Zero-Day Options
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Zero-Day Options (0DTE): What They Are, Risks
Zero-day options expire in less than one day. We're examining the recent popularity of "0DTE" options trading and its risks.
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9 years of experience Expertise Stocks ETFs economic newsSam Taube writes about investing for NerdWallet. He has covered investing and financial news since earning his economics degree from the University of Maryland in 2016. Sam has previously written for Investopedia, Benzinga, Seeking Alpha, Wealth Daily and Investment U, and has worked as an editor for Investment U, Wealth Daily and Haven Investment Letter. He is based in Brooklyn, New York.
Sam Taube writes about investing for NerdWallet. He has covered investing and financial news since earning his economics degree from the University of Maryland in 2016. Sam has previously written for Investopedia, Benzinga, Seeking Alpha, Wealth Daily and Investment U, and has worked as an editor for Investment U, Wealth Daily and Haven Investment Letter. He is based in Brooklyn, New York. Published in Lead Writer + more + more
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19 years of experience Expertise Retirement planning investment management investment accountsArielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia.
Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia. Published in Head of Content, Investing & Taxes + more + moreMany traders try to profit from short-term stock market swings by buying call or put options, rather than buying the underlying stocks.
Many traders try to profit from short-term stock market swings by buying call or put options, rather than buying the underlying stocks.Some investors use options as insurance against unexpected market movements (for example, selling covered calls on a stock they own) or buy call options to gain exposure to a stock at a cost less than the price of its shares.
Some investors use options as insurance against unexpected market movements (for example, selling covered calls on a stock they own) or buy call options to gain exposure to a stock at a cost less than the price of its shares.But other traders use options for high-risk, high-reward speculation. Recently, an especially risky type of options trading strategy has become popular among speculators: zero-day options, also known as 0DTE options.
But other traders use options for high-risk, high-reward speculation. Recently, an especially risky type of options trading strategy has become popular among speculators: zero-day options, also known as 0DTE options.Need to back up? How to start options trading
Need to back up? Need to back up? How to start options tradingBrokerage firms
Brokerage firms
Brokerage firmson Charles Schwab's website
on E*TRADE's website
on Vanguard's website
on Fidelity's website
What are 0DTE options?
What are 0DTE options?Zero-day options are normal options — puts and calls — that expire in less than one day, hence the “0DTE” nickname (short for “zero days to expiration”).
Zero-day options are normal options — puts and calls — that expire in less than one day, hence the “0DTE” nickname (short for “zero days to expiration”).Typically, traders buy options well in advance of their expiration date. A trader might buy call options, and then wait for positive investor sentiment or good news (such as a favorable earnings report) to increase the price of the underlying stock, so that they can resell or exercise the calls for a profit before expiration.
Typically, traders buy options well in advance of their expiration date. A trader might buy call options, and then wait for positive investor sentiment or good news (such as a favorable earnings report) to increase the price of the underlying stock, so that they can resell or exercise the calls for a profit before expiration.But 0DTE option traders buy options on the day they expire, in the hopes that they can quickly profit from a last-minute swing in price.
But 0DTE option traders buy options on the day they expire, in the hopes that they can quickly profit from a last-minute swing in price.Why has zero-day options trading become popular recently?
Why has zero-day options trading become popular recently?According to researchers at the Johns Hopkins Carey Business School, the volume of 0DTE options on S&P 500 stocks more than doubled between 2021 and 2024, and accounted for more than 43% of the total daily options volume on those stocks as of 2024
According to researchers at the Johns Hopkins Carey Business School, the volume of 0DTE options on S&P 500 stocks more than doubled between 2021 and 2024, and accounted for more than 43% of the total daily options volume on those stocks as of 2024 Johns Hopkins Carey Business School. Risk and reward: New insights on 0DTE option trading. Accessed Oct 30, 2024. .Some of the reasons for the growing popularity of zero-day options include:
Some of the reasons for the growing popularity of zero-day options include:Low premiums: 0DTE options are often cheaper to buy than longer-dated options because time-to-expiration is a variable that affects option pricing. (More on that below.)
Low premiums: Low premiums: 0DTE options are often cheaper to buy than longer-dated options because time-to-expiration is a variable that affects option pricing. (More on that below.)Quick turnaround: Zero-day option trades, by definition, are opened and closed in a single day. That may appeal to traders who want to see fast results and don’t like monitoring their investments over time.
Quick turnaround: Quick turnaround: Zero-day option trades, by definition, are opened and closed in a single day. That may appeal to traders who want to see fast results and don’t like monitoring their investments over time.Availability of daily 0DTE options on some indexes: Since 2022, the Chicago Board Options Exchange (CBOE) has increased the number and type of options available on the S&P 500 index and Nasdaq 100 index, such that there are now options on these indexes expiring every trading day. That has made 0DTE trading available daily.
Availability of daily 0DTE options on some indexes: Availability of daily 0DTE options on some indexes: Since 2022, the Chicago Board Options Exchange (CBOE) has increased the number and type of options available on the S&P 500 index and Nasdaq 100 index, such that there are now options on these indexes expiring every trading day. That has made 0DTE trading available daily.What are some of the risks of 0DTE options?
What are some of the risks of 0DTE options?There are reasons why zero-day options have become popular, but there are also reasons to be wary of their popularity. Zero-day options often come with outsize risks, even compared to normal options. These include:
There are reasons why zero-day options have become popular, but there are also reasons to be wary of their popularity. Zero-day options often come with outsize risks, even compared to normal options. These include:Losing your entire investment: 100% losses are a potential risk of any options purchase, as options that are not profitable at their expiration date tend to expire worthless. But while normal options traders can watch the market in the days or weeks leading up to expiration and adjust for unexpected developments, zero-day options traders are making everything-or-nothing bets on expiration day. That means 100% losses are harder to avoid.
Losing your entire investment: Losing your entire investment: 100% losses are a potential risk of any options purchase, as options that are not profitable at their expiration date tend to expire worthless. But while normal options traders can watch the market in the days or weeks leading up to expiration and adjust for unexpected developments, zero-day options traders are making everything-or-nothing bets on expiration day. That means 100% losses are harder to avoid.Time decay: There are several variables that affect the price of an option. The price of the underlying stock matters, but so does the time left until expiration. An option’s value generally decreases as it nears expiration; this is referred to as “time decay” or “theta decay.” Without a favorable last-minute move in the underlying stock’s price, the price of many 0DTE options will approach zero throughout the trading day due to time decay. This is why zero-day options tend to have relatively low premiums.
Time decay: Time decay: There are several variables that affect the price of an option. The price of the underlying stock matters, but so does the time left until expiration. An option’s value generally decreases as it nears expiration; this is referred to as “time decay” or “theta decay.” Without a favorable last-minute move in the underlying stock’s price, the price of many 0DTE options will approach zero throughout the trading day due to time decay. This is why zero-day options tend to have relatively low premiums.Feedback effects: The rising popularity of 0DTE options could amplify expiration-day price swings, which in turn would increase the potential risk and reward of 0DTE options trading.
Feedback effects: Feedback effects: The rising popularity of 0DTE options could amplify expiration-day price swings, which in turn would increase the potential risk and reward of 0DTE options trading.It’s worth noting that financial advisors generally don’t recommend risky options trading strategies for most people. They’re more likely to recommend a long-term, low-maintenance approach to investing, such as dollar-cost averaging into index funds.
It’s worth noting that financial advisors generally don’t recommend risky options trading strategies for most people. They’re more likely to recommend a long-term, low-maintenance approach to investing, such as dollar-cost averaging into index funds.If you’re already investing for the long term, and you have extra money that you want to try zero-day options trading with, just be careful: Understand that you’re making an all-or-nothing bet, and that you’ll win or lose that bet in less than a single trading day.
If you’re already investing for the long term, and you have extra money that you want to try zero-day options trading with, just be careful: Understand that you’re making an all-or-nothing bet, and that you’ll win or lose that bet in less than a single trading day.» Want to start trading options? See our picks for the best options trading brokers
» Want to start trading options? » Want to start trading options? See our picks for the best options trading brokersHelpful resources
Helpful resources Put Options: What They Are, How They Work and How to Trade Them How to Trade Options: Strategies, Calculators and Examples Best Brokers for Options Trading: 2026 Top Picks More like this Investment Basics Investing Stocks Best Brokers for Options Trading: 2026 Top Picks After hours of analysis, we found that these options platforms charge low or no options contract fees and offer investors the tools and research necessary for options trading. Chris Davis How to Trade Options: Strategies, Calculators and Examples Interested in trading options? This quick-start guide covers how to open an options account, basic strategies, plus examples and calculators to help you get started. 2 By Sam Taube, James Royal, Ph.D.