Zero-days-to-expiry options have gone from a niche product to a dominant force in S&P 500 trading, now accounting for roughly 43% of volume this year and averaging around 50% in August. That shift is changing how dealers hedge, and new research shows it can feed intraday momentum in ways that surprise even seasoned traders.
The Rise of 0DTE
In 2016, 0DTE options made up about 5% of SPX option volume. By 2023, that figure had climbed to 43% year-to-date, with August averaging near 50%. The growth hasn't slowed. Cboe reported record U.S. options volume in Q2 2026, with quarterly average daily volume near 21.9 million contracts and June ADV around 23.0 million.
The popularity of same-day expirations has made them a standard tool for speculators and hedgers alike. But the mechanics of how dealers manage the risk from these contracts are drawing fresh attention.
How Short Gamma Works
When dealers sell call options, they take on short gamma exposure. That means as the underlying price rises, they must buy more of the stock to stay hedged, which pushes the price higher still. The effect can snowball, especially when option buyers aggressively lift offers, sending implied volatility up alongside the price.
Academic research by Baltussen, Da, Lammers, and Martens, published in the Journal of Financial Economics, finds that this short-gamma hedging demand produces statistically significant intraday momentum. Specifically, the last 30 minutes of a trading day's return are positively predicted by earlier intraday returns. In other words, when the market has been moving, the final stretch tends to follow.
Signs in the Tape
Concrete examples of this dynamic have shown up in the options flow. On May 29, 2026, a same-day SPY call sweep of 217,134 contracts was flagged by MarketChameleon, a size that suggests institutional positioning rather than retail noise.
More recently, on July 18, 2026, SPY call premium rose while the price reversed lower. That pattern is consistent with spreads, rolls, or positioning changes rather than fresh net bullish demand, according to the analysis.
Dealer gamma exposure in SPX 0DTE options is relatively small in notional terms. Cboe's analysis shows median net dealer gamma exposure of roughly $170 million to $670 million delta per 1% move, with extremes ranging from about -$5 billion to +$7.7 billion. That's only 0.04% to 0.17% of daily S&P futures notional. But even a small imbalance can matter when it's concentrated in the final hours of trading.
The takeaway from the research and the flow data is that a rally accompanied by rising implied volatility often points to a short-gamma or flow-constrained tape, not a slow-moving fundamental repricing. Traders who read that signal can adjust their expectations for how far and how fast a move might run.
The pattern isn't new, but the scale is. With 0DTE volume now a major slice of the market, the feedback loop between dealer hedging and price action is more pronounced than it was a few years ago.
The next question is whether the trend continues as volume records keep falling. Cboe's next quarterly report will show if the pace holds, and the academic evidence suggests the intraday momentum effect is here to stay.
