Gamma Hunting: Zero-Day Options as an Edge—Myth or Must-Have?

Table of Contents

1. Introduction: The Rise of 0DTE Trading

Zero-day-to-expiration (0DTE) options have exploded in popularity since 2022, but in 2025 they’ve become a structural force in the equity-options market. Once dismissed as tools for gamblers, 0DTEs are now used by retail and institutional traders alike for tactical hedging, market making, and even directional momentum plays.

At the center of the hype lies the promise of “gamma hunting”—using ultra-short-dated options to exploit dealer positioning, trigger feedback loops, and profit from rapid market reactions. But is this edge real or just another mirage in the desert of intraday volatility?

2. What Is Gamma and Why It Matters Intraday

In options trading, gamma refers to the rate of change of delta as the underlying asset moves. High gamma means small moves in the underlying create big changes in delta, which in turn can force option sellers (dealers) to hedge aggressively.

In the case of 0DTE options:

➤ ➀ Gamma is extremely high near-the-money—especially in the final hours of expiration
➤ ➁ Dealer hedging creates potential feedback loops (buying leads to more buying)
➤ ➂ Traders attempt to front-run or exploit these dynamics—this is “gamma hunting”

While gamma has always mattered in options pricing, 0DTEs condense that dynamic into a few hours—often minutes—turning intraday tape into a battleground of forced flow.

3. The 2025 0DTE Landscape: Liquidity, Speed, and Volatility

Today, 0DTEs account for over 45 % of total SPX and QQQ options volume on a given day. Several shifts have contributed to this explosion:

➤ ➀ Exchanges now offer daily expirations (Mon–Fri) for SPY, QQQ, IWM, and more
➤ ➁ Market makers provide tight bid-ask spreads with millisecond liquidity
➤ ➂ Algorithmic flows and volatility triggers cause intraday mini squeezes

As a result, 0DTE options can be used for:

➤ ➀ Precise event-based speculation (Fed meetings, CPI releases)
➤ ➁ Tactical risk hedging (hedge downside without tying up premium)
➤ ➂ Aggressive day trading with asymmetric payoff profiles

But with great leverage comes great risk—and potentially fleeting edge.

4. Edge or Noise? What the Data Suggest

Academic and quant studies on 0DTE flows (e.g., Cboe/GS 2024 whitepaper) suggest:

➤ ➀ Most 0DTE volume is market-neutral or hedging-related
➤ ➁ Retail directional flows tend to lose money on average due to spread costs and timing
➤ ➂ Short-term volatility regimes and dealer gamma positioning can cause exaggerated moves—but rarely predictably

For example, a “long gamma” dealer book leads to dampened volatility, while “short gamma” scenarios amplify it. Traders who can infer dealer positioning (via tools like SpotGamma, Squeezemetrics, or real-time order-flow dashboards) may gain an edge—but it’s not guaranteed.

More importantly, intraday reversals often occur after gamma cliffs (e.g., near strikes like 4500 or 5000 in SPX) where option open interest is concentrated.

5. Execution, Risk, and Psychological Demands

If you’re using 0DTEs, you’re not just battling price—you’re battling time. The decay is brutal, the windows are small, and the precision must be surgical.

Common pitfalls include:
➤ ➀ Getting chopped in low-vol environments
➤ ➁ Buying too far OTM strikes (cheap ≠ edge)
➤ ➂ FOMO entries on gamma-trigger moves

To compete effectively, traders need:
➤ ➀ A clear entry/exit plan (defined delta zones, max-loss rules)
➤ ➁ Speed of execution (hotkeys, multi-broker platforms)
➤ ➂ Psychological discipline to take singles—not home runs

Most professional traders treating 0DTEs seriously operate with tight stop-loss automation, multi-monitor setups, and real-time liquidity heatmaps.

6. When (and When Not) to Use 0DTE Gamma Exposure

When it may work:
➤ ➀ During known catalysts (FOMC, NFP, CPI)
➤ ➁ Near high open-interest strikes (e.g., Max-Pain zones)
➤ ➂ In trend days with strong market breadth and VIX compression

When to avoid:
➤ ➀ Choppy, low-volume days (especially summer Fridays)
➤ ➁ When bid-ask spreads widen or implied vol is overpriced
➤ ➂ If you’re prone to overtrading or can’t cut losses fast

Remember: Gamma can amplify your position or destroy it—there’s little middle ground.

7. Frequently Asked Questions