When Do 0DTE Options Expire? The Exact Expiration Time

Options contracts are financial agreements that grant the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specific date. A specialized category within this market is Zero Days To Expiration, or 0DTE, options. These options are designed to expire on the same day they are traded. This article will explain the characteristics of 0DTE options, detailing their exact expiration times and the processes that unfold on their expiration day.

What Are 0DTE Options

0DTE options are option contracts that are set to expire at the close of the current trading day. The term “Zero Days To Expiration” signifies that the contract has reached its final day of existence. Unlike traditional options, which might have expiration periods ranging from days to months or even years, 0DTE options have an extremely compressed lifespan.

While any option becomes 0DTE on its final trading day, the term primarily refers to specific options listed for daily expiration. These are commonly available on major indices like the S&P 500 Index (SPX) and Nasdaq 100 Index (NDX), as well as heavily traded exchange-traded funds (ETFs) such as the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ). The Chicago Board Options Exchange (CBOE) has expanded weekly options to offer expirations on every trading day of the week for these popular underlying assets. This short lifespan means positions opened with 0DTE options are typically closed or settled within the same trading session.

The Exact Expiration Time

The precise expiration time for 0DTE options depends on the underlying asset. Most equity and ETF options, such as those on SPY or QQQ, expire at 4:00 PM Eastern Time (ET), which aligns with the close of the regular U.S. stock market. However, these options often have a slightly later official expiration or settlement time, around 4:15 PM ET, due to post-market price adjustments.

For index options, like SPX and NDX, the expiration time is typically 4:00 PM ET. These options are often “PM-settled,” meaning their final value is determined by the closing price of the underlying index on the expiration day. Trading in these options usually concludes at the market close.

Weekends and holidays directly impact the availability and expiration of 0DTE options. Options only expire on trading days. If a scheduled expiration day falls on a weekend or a market holiday, the expiration date is typically shifted to the last preceding trading day. This ensures that the options always expire on a day when the market is open and trading can occur.

Expiration Day Processes

On the expiration day, processes unfold leading to the final settlement of 0DTE options. Trading in these options typically ceases at the market close, around 4:00 PM ET for most equity and ETF options, and at that time for index options. This trading cut-off means no new positions can be opened, nor can existing positions be adjusted or closed through market transactions after this point.

A significant distinction exists in how options are settled: cash settlement versus physical settlement. Index options, such as SPX and NDX, are typically cash-settled. This means that at expiration, if the option is in-the-money, the holder receives a cash payment equivalent to the intrinsic value, and no physical shares of the underlying index are exchanged. Conversely, equity and ETF options, like those on SPY and QQQ, are physically settled. For these, if the option is exercised, the buyer either receives or is obligated to deliver the actual shares of the underlying stock or ETF.

For options that are “in-the-money” at expiration, automatic exercise procedures are in place. The Options Clearing Corporation (OCC) generally auto-exercises options that are in-the-money by at least $0.01 at the time of expiration. This means that for a call option, if the underlying asset’s price is above the strike price, or for a put option, if it’s below the strike price, the option is automatically exercised. Holders of American-style options, common for equities and ETFs, can also manually exercise their options at any time before expiration, while European-style options, often index options, can only be exercised at expiration.

The final settlement value for an option is determined by the closing price of the underlying asset on the expiration day. For cash-settled index options, this value is used to calculate the net cash payment. For physically settled equity or ETF options, this closing price dictates whether the option is in-the-money and thus results in the delivery or receipt of shares.

Characteristics of Rapid Expiration

The short lifespan of 0DTE options creates unique characteristics compared to longer-dated contracts. One prominent feature is accelerated time decay, often referred to as Theta. Time decay represents the rate at which an option’s extrinsic value erodes as it approaches expiration. For 0DTE options, this decay is significantly more pronounced and rapid, particularly in the final hours of the trading day. This rapid loss of value means that the option’s premium can diminish quickly, even with minimal movement in the underlying asset.

Another characteristic is heightened sensitivity to underlying movement, known as Gamma. Gamma measures the rate of change of an option’s Delta, which is its directional sensitivity to the underlying asset’s price. As expiration nears, 0DTE options exhibit high Gamma levels, meaning their prices can change dramatically with even small movements in the underlying stock or index. This high Gamma makes their pricing highly reactive to intraday market fluctuations.

Implied volatility also plays a substantial role in the pricing of 0DTE options. While all options are affected by volatility, the short timeframe of 0DTE contracts means that even slight shifts in implied volatility can have a significant impact on their premium. The compressed time frame amplifies the effect of volatility on potential price swings, making these options particularly sensitive to market expectations of future price movements.