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Zero days to expiry (0DTE) options are becoming the go-to tool for many traders. In May 2025, these one-day bets on market movements accounted for more than 61% of S&P 500 options volume, as retail investors chase the dream of quick riches with clearly defined risk.
The potential to quickly secure a huge gain with a defined maximum loss appeals to many retail investors. However, there are strings attached, and, as is the case with high-risk, high-reward gambles, the losers far outnumber the winners.
Key Takeaways
- There has been significant growth in the volume of zero-day options trades in recent years.
- Many investors use 0DTE options as a form of insurance against unexpected market movements.
- However, retail traders increasingly view them as a quick way to make a substantial amount of money, albeit with significant risks involved.
Understanding Zero-Day Options
Zero-day-to-expiry options are financial derivatives that give investors the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price by the end of the trading day, in exchange for a fee known as the premium.
Historically, these options were used by institutional investors to hedge against large price swings on days when information, known to shift valuations, was due out, such as inflation numbers or Federal Reserve interest rate decisions. Now they are in the mainstream and regularly used by retail investors to bet on whether a particular stock market index will rise or fall by the end of the day.
0DTE options are not limited to stock market indexes and popular exchange-traded funds. Any stock, ETF, or stock index will have a 0DTE option at least on the expiry day. Options may expire weekly, monthly, or quarterly. Popular stocks, including Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Microsoft Corporation (MSFT), and Tesla, Inc. (TSLA), may trade 0DTE options more frequently.
Important
A 2024 study by researchers at the University of Münster found that transaction costs accounted for 70% of total 0DTE options losses. This means that even if retail investors were breaking even on their actual bets, they’d still be losing massive amounts just from the fees charged to enter and exit trades.
Why Zero-Day Options Are Popular
The appeal of zero-day options is understandable, especially when markets are volatile.
For speculators, they offer the chance to make a lot of money in a short timeframe. 0DTE options are relatively cheap to buy, the amount that can be lost is established at the onset, and within a few hours it’s possible, if the position enters the money before it expires, to walk away with a windfall.
Some investors also use 0DTE options for what they were originally designed for: insurance against unexpected market movements. For instance, if you hold a bank stock, you could consider buying a 0DTE put option on it on the days when inflation or federal funds rate figures are published. Doing so would protect you if the numbers are worse than feared and the share price falls.
Risks and Considerations
Some Wall St. onlookers like CNBC host Jim Cramer have compared zero-day options to casino gaming because they offer a big payout in exchange for a fee and very rarely deliver on their potential. These contracts, he has said, represent gambling, not investing, and could lead to addiction.
Skeptics argue that part of the trap is the seemingly affordable costs. Because these options expire by the end of the day, their premiums are quite low. However, the fees quickly add up and drain accounts over time, particularly as most zero-day options expire worthless.
Research from the University of Münster reveals a troubling dynamic in the 0DTE market. They analyzed millions of trades and discovered that sophisticated traders with high conviction—those placing most of the larger orders—are predominantly selling 0DTE options, while retail investors are overwhelmingly buying them.
This creates what could amount to a predator-prey relationship: knowledgeable traders are essentially running a casino, collecting premiums from retail investors who might think they’re making shrewd bets. The data shows these sellers are raking in profits while buyers consistently lose money, suggesting retail traders are funding the gains of more sophisticated traders betting against them.
The Bottom Line
Zero-day options can be useful to hedge short-term market moves and make quick gains. However, their entering the mainstream shouldn’t necessarily be celebrated. Experts reviewing the data have found that these options amplify price movements, could destabilize financial markets, and, for many traders, amount to a form of gambling.
