0DTE Index Options and Market Volatility: How Large is Their Impact?

Abstract The large volume of trading in 0DTE S&P 500 index options suggests that options market makers (OMMs) have large positions in these options. Because short-dated options have large gammas, OMMs’ hedge rebalancing trades might be large enough to impact the index. We estimate the maximum impact of OMM gamma on index volatility using proprietary […] Source