0DTE options explained

An option's gamma rises as expiry approaches for strikes near the current price. On the final day an at-the-money option can move from worthless to deep in the money within minutes, so its delta, and the hedge behind it, changes far faster than a monthly option's would.

That is why 0DTE flow can move the index intraday even when its open interest is small next to monthly contracts: the hedging needed per contract is much larger.

The strikes with the most same-day open interest act as magnets or walls. When dealers are long gamma there, they sell rallies into the strike and buy dips toward it, which can pin the close. When they are short gamma, a break through the strike can accelerate.

Open interest only updates overnight, so it does not show contracts opened and closed within the same day. Treat the morning's strike map as a starting point, not a live count.

Buyers pay little premium, but time decay on the last day is brutal: an option that is still out of the money at the close is worth zero. Sellers collect premium with a high win rate and accept rare, very large losses when the index moves sharply. Neither side has an edge from the structure alone.

SPX options are cash settled and European style, so there is no early assignment and no shares delivered. SPY options are American style and settle into shares, which matters if a short position finishes in the money.