0DTE expected move: sizing same-day SPX and SPY trades
Zero-days-to-expiry options now make up more than half of all SPX volume on many days, and same-day expiries exist on SPY, QQQ, IWM and a growing list of single stocks. The expected move is the number that makes 0DTE trading survivable, and it behaves differently on the expiry day than on any other day. This guide covers the differences.
Use the straddle, not implied volatility
On expiry day, the at-the-money options have almost no time value, so the implied volatility a data vendor backs out of them swings wildly with each cent of price. A 0.05 change in a 1.00 option is a 5% change in price and a huge change in quoted IV. The straddle price itself, though, is a real bid and offer. Price the range from the straddle:
SPX at 6,450 with the 6,450 straddle at 28.00 gives 28 / 6,450 = 0.434%, times 1.2533 = 0.544%, or about 35 points. That is one standard deviation for the rest of the session.
The range shrinks with the square root of time left
Time to expiry on the expiry day is a fraction of a trading day, and it falls through the session. Since the range scales with √T, the range at 12:30 (half the session left) is about 71% of the range at the open, and the range at 3:00 (one hour left) is about 39% of it. The straddle price reflects this automatically because the market is repricing it, which is one more reason to use the straddle rather than a morning IV reading.
| Time (ET) | Session remaining | Range vs open |
|---|---|---|
| 9:30 | 100% | 100% |
| 11:00 | 77% | 88% |
| 12:30 | 54% | 73% |
| 14:00 | 31% | 55% |
| 15:00 | 15% | 39% |
The practical consequence: a strike that was one standard deviation out at the open is nearly two standard deviations out by 2:00 if the index has not moved. Premium sellers get paid for the morning risk and then watch the risk evaporate; premium buyers need the move to come early.
Where the daily range comes from
The 0DTE expected move is not a forecast of the day's high-low range. It is the one-standard-deviation range of the close relative to the current price. Intraday extremes are wider. A rough rule from the statistics of random walks is that the expected high-low range of a session is about 1.6 times the expected close-to-close move, so a 0.54% expected move implies a typical intraday range of roughly 0.85%.
Sizing a 0DTE trade
Selling premium
An iron condor with short strikes at one expected move on each side is a bet that today is an inside day, which is true roughly two days in three. The loss on the third day is a multiple of the premium collected. Position size should be set so the losing day, not the winning day, is survivable: if the maximum loss is five times the credit, the strategy needs a hit rate above 83% just to break even on a fee-free basis, which is above what one standard deviation delivers. Many sellers move short strikes to 1.25 or 1.5 expected moves for that reason.
Buying premium
A call one expected move above the market has roughly a one-in-six chance of finishing in the money, and needs the move to happen while there is still time value to sell. Buying it at the open and holding to the close is a low-probability bet; buying it into a specific catalyst (a data release, a scheduled speech) with a plan to exit within the hour is a different trade with the same instrument.
Scheduled events
On days with an 8:30 data release or a 2:00 Fed announcement, the straddle at the open already prices the event. Reading the range before and after the release shows how much of the day's expected move was the event: it is common for the 0DTE range to halve within minutes of a release as the uncertainty resolves.
Three mistakes to avoid
- Using yesterday's number. The 0DTE range must be read from the live chain at the time of the trade.
- Reading annual IV. A "20% VIX" says nothing directly about today; the daily one-standard-deviation move at 20% annualised is about 1.26%, and the intraday 0DTE straddle is usually pricing less than that after the open.
- Treating the edge as a wall. One session in three closes outside one standard deviation. On the day it does, the loss on a short strangle at the edge is typically larger than several days of premium.
Read the live number on the SPY page or the QQQ page; the nearest expiry row is the 0DTE range whenever a same-day expiry exists.