0DTEs: Trading, Gamma Risk and Volatility Propagation

Fri Apr 04 2025 at 03:00 pm to 04:00 pm UTC-05:00

6708 Pine St room 117 | Omaha

University of Nebraska Omaha Economics
Publisher/HostUniversity of Nebraska Omaha Economics
0DTEs: Trading, Gamma Risk and Volatility Propagation
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Part of a UNO Economics seminar series. Research seminars run from 3PM-4PM. Appetizers at Inner Rail afterwards.
About this Event

Abstract:

We study the recent explosion in trading of same-day expiry (0DTE) options on the S&P500 index. 0DTE positions can destabilize the underlying market when delta-hedging requires trading in the same direction as realized returns. We address this concern by investigating whether measures of trading activity propagate volatility. We find no evidence that aggregate open interest and trading volume increase volatility. On the contrary, market makers' inventory gamma is significantly and negatively associated with future intraday volatility. This evidence is consistent with delta-hedging by market makers because, in our sample, they hold a predominantly positive inventory in 0DTEs.

Paper on SSRN


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Event Venue & Nearby Stays

6708 Pine St room 117, 6708 Pine Street, Omaha, United States

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USD 0.00

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