Zero-day options traders bet on a 'calm' S&P 500: 66% of trading volume expires on the same day, contrarian low-buy high-sell strategy acts as a market 'stabilizer'

It has been noted by Zhitong Finance APP that while some investors are betting that AI earnings, geopolitics, and interest rates will push the stock market to new highs or drag it into a plunge, zero-day options traders are increasingly betting that the S&P 500 index will remain calm.

According to Kiran Diamond, derivatives strategist at UBS Group, an analysis of capital flows into same-day expiry options (0DTE) reveals a clear shift among tactical traders: buying calls and selling puts when the market falls, and the reverse when it rises. This strategy is referred to as “contrarian Delta tilt,” with the net effect being buy low sell high, further suppressing volatility in the S&P 500 index.

Garrett DeSimone from OptionMetrics stated that same-day expiry options have become an unusually important component in the daily fluctuations of the index, with about 66% of total trading volume expiring within the day. This puts short-term position allocation under the spotlight, as both retail and institutional traders are trying to figure out how option flows impact this $66 trillion U.S. benchmark index.

Diamond said, "This contrarian trading pattern appears to be a response to an extremely range-bound market. The scale of these option flows means that they may begin to have a self-fulfilling effect—option investors are helping to restrain price swings in both directions."

While some investors are betting that AI earnings, geopolitics, and interest rates will push the stock market to new highs or drag it into a plunge, zero-day options traders are increasingly betting that the S&P 500 index will remain calm.

According to Kiran Diamond, derivatives strategist at UBS Group, an analysis of same-day expiry option flows reveals a clear shift among tactical traders: buying calls and selling puts when the market falls, and the reverse when it rises. This strategy is referred to as “contrarian Delta tilt,” and its net effect resembles buying low and selling high, further suppressing volatility in the S&P 500 index.

Garrett DeSimone of OptionMetrics noted that same-day expiry options now play a disproportionately significant role in the index’s daily volatility, with roughly 66% of total trading volume expiring within the day. As a result, short-term position allocation is drawing intense attention as both retail and institutional traders try to decipher how option flows affect this $66 trillion U.S. benchmark index.

Diamond said, "This contrarian trading pattern seems to be a response to an extremely range-bound market. The sheer size of these options flows means it could start to have a self-fulfilling effect—option investors are helping to limit price volatility in both directions."

UBS noted that the growth of 0DTE contrarian trading flows has now reached such proportions that its net effect exceeds that of options dealers’ re-hedging impact.

The “effective gamma” generated by contrarian trading is higher than that of actual options dealers

Of course, if the market were to experience sustained selling—something more significant than Thursday’s 1.2% drop in the S&P 500 led by the AI sector—this pattern could change.

Diamond noted, "Although the contrarian flows have been very consistent so far, nothing rules out a reversal of this dynamic during periods of rising volatility. If 0DTE investors switch to buying puts to chase a declining market, their flows could amplify the selloff and pile pressure on market makers to manage short-Gamma risk."

Although the impact on the S&P 500 is to dampen volatility, short-term trading in sectors such as technology sometimes produces the opposite effect. This has given rise to successful intraday momentum strategies—whose capital flows tend to amplify both gains and losses.

Adrian Zeliou, CEO of Premialab, commented, "Dealer hedging associated with 0DTE options can reinforce intraday momentum or promote mean reversion, depending on the dominant Gamma regime at the time. During the rally from April to June, intraday momentum strategies focused on semiconductors performed strongly. Meanwhile, current focus on reversal signals in the S&P 500 highlights how these dynamics can differ vastly between market environments."

He added that since the end of March 2025, the number of live strategies in this segment within Premialab's QIS database has risen by 50%.

Zeliou said, "The key challenge lies in turning these signals into strategies that can consistently capture these effects, while also accounting for execution costs."

Overall, demand for insight into options positioning is growing, with more and more retail platforms entering the space and offering market data. Each platform has its own methodology for mapping intraday option Greeks—Gamma, Vanna, and Charm—indicators that reflect how traders and dealers may need to respond, all aiming to give market speculators an edge.

The boom in 0DTE trading has solidified the role of position allocation as a key technical driver of intraday price moves. Currently, nominal value of Delta adjustments in S&P 500 option portfolios has easily surpassed the average daily trading volume of E-mini futures—indicating that sometimes, the “tail” of options wags the “dog” of stocks.

Delta values from S&P 500 options trading exceed those of futures trading

The expansion of data sources and rising demand for insights has prompted some institutional service providers to refine their estimates of dealers’ net positions. Early frameworks typically assumed all calls were sold by end clients and all puts were bought by clients, but newer models are more nuanced.

Derivatives strategists at JPMorgan recently wrote that they have abandoned using open interest proxies to estimate S&P 500 Gamma positions in favor of a more flow-based approach, leveraging data from Cboe Global Markets—which can granularly differentiate whether each option trade was initiated by a client as a buy or a sell.