Same-day options now drive a large share of S&P 500 trading, and the hedging dealers run against them can amplify or suppress price swings independent of news. The mechanism is gamma: the rate at which an option's delta shifts as the index moves, and it decides whether dealer flows push prices further or pull them back.
Dealers who sell options don't take directional bets. Instead, they hedge the resulting delta exposure by buying or selling futures on the underlying index, a practice known as delta-neutral hedging. When dealers are short gamma, they must buy futures as prices rise and sell as prices fall — chasing the move rather than fading it, which can amplify the swing. When dealers are long gamma, they do the opposite: selling into rallies and buying into dips, a pattern known as gamma pinning that can suppress volatility and pull the index toward a heavily traded strike into expiration.
0DTE volume now dominates S&P 500 options
Zero-days-to-expiration options — contracts that expire the same day they trade — have grown from a niche product into a dominant share of the market. On the S&P 500 index, 0DTE volume routinely accounts for more than 40–50% of total daily options volume, according to Investing.com. Gamma peaks on expiration day itself: as time value collapses, a small move in the index can swing an at-the-money option's delta from near zero to near one, forcing dealers to rehedge in real time.
Heavy call buying can trigger a gamma squeeze
Concentrated call buying at strikes just above the current price can set off a gamma squeeze. Dealers who are short those calls must buy futures to stay hedged, which nudges the index higher; as it approaches the strike, rising delta forces further buying, a loop that can accelerate into a rapid, parabolic move. The reverse dynamic, when dealers are net sellers of puts and run long gamma, can keep the market calm even when macro uncertainty is elevated — a state where a low VIX reading does not necessarily mean low risk.
Why the zero-gamma line matters
The shift between these two regimes is called crossing the zero-gamma line. When aggregate dealer gamma flips negative, the market's mechanical shock absorber disappears and volatility can accelerate sharply in either direction. Expiration days, especially monthly and quarterly ones, concentrate this exposure and can produce outsized, often counter-intuitive moves that have nothing to do with earnings, macro data, or geopolitics.
Source: Investing.com
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