Zero-Day Option Traders Are Betting Against Big S&P 500 Swings

• 0DTE options traders increasingly buy calls/sell puts on dips, sell calls/buy puts on rallies • This 'counter-trend delta bias' suppresses S&P 500 swings, acting like positive gamma • About 66% of S&P 500 options volume now expires same-day, amplifying the effect Zero-day-to-expiry (0DTE) options traders are increasingly betting the S&P 500 will stay calm, even as investors weigh AI earnings, geopolitics, and interest rates. UBS derivatives strategist Kieran Diamond found a shift toward tactical traders buying calls and selling puts when the market falls, and doing the reverse during rallies — a "counter-trend delta bias" that effectively buys low and sells high, dampening volatility. About 66% of S&P 500 options volume now expires within a day, according to Garrett DeSimone of OptionMetrics, making short-term positioning increasingly influential on the $66 trillion index. "This counter-trend trading pattern seems to be a response to very rangebound markets," Diamond said, noting the flows are large enough to become self-fulfilling, limiting price moves in either direction. The pattern, notable since 2024, mirrors the stabilizing effect of positive gamma, with traders buying dips and selling rallies similar to delta-neutral option dealers. It compounds another stabilizing force: a long option-dealer gamma regime driven partly by a large institutional trader selling one-day iron condors. UBS says the 0DTE counter-trend flow has grown so large it now outweighs the impact of dealer re-hedging.