Same day index options now dominate activity in the S&P 500 (SPX) and Nasdaq 100 (NDX), with 0DTE SPX and NDX contracts heavily trafficked by retail accounts. Retail flow is a structural component of intraday liquidity in these products, rather than a marginal presence.
Historical profit and loss data on SPX 0DTE options show retail traders systematically on the losing side. Across February 2021 to September 2023, daily average losses for retail buyers of these contracts reached the hundreds of thousands of dollars per session.
These losses align with a broader pattern seen in short dated index options and structured products, where retail demand for lottery like, out of the money positions has produced significantly negative average returns. Similar results were documented earlier in SPX, DAX and EURO STOXX 50 (EUSTX50) options, and in weekly SPY and QQQ contracts.
Professional market makers and systematic funds typically provide the liquidity that absorbs this demand, collecting bid ask spreads and a volatility risk premium as compensation. Exchange operators and brokerages also benefit economically from elevated 0DTE turnover, regardless of which side ultimately books the trading losses.
In this environment, SPX and NDX 0DTE order flow reflects a recurring transfer of option premium from retail accounts to institutional counterparties. The persistence of that transfer has so far depended on retail continuing to chase short horizon payoffs while institutions manage inventory and hedging across the underlying S&P 500 (SPX) index and Nasdaq 100 (NDX) index.
Terminology
- 010DTE: Options that expire on the same day they are traded.
- 02Volatility risk premium: Extra return earned for selling options that insure against price swings.