0DTE Volatility Surges on Earnings Week Chaos

The final hours of 2025 were marked by a seismic shift in market dynamics, driven by the explosive growth of zero-day-to-expiration (0DTE) options trading. As earnings seasons collided with macroeconomic uncertainty and regulatory tailwinds, the S&P 500 options market became a battleground for institutional and retail investors alike. This article dissects the interplay of investor sentiment, options activity, and volatility patterns in the final week of 2025, revealing how 0DTE options reshaped the landscape of derivative-led price discovery.

The 0DTE Surge: A New Era of Short-Dated Trading

By late 2025, 0DTE options had cemented their dominance in the S&P 500 options market. According to a report by Citadel Securities and CBOE, SPX 0DTE options accounted for 62% of overall SPX volume in Q3 2025, averaging 2.4 million contracts per day. This trend accelerated in the final week of 2025, with 0DTE options representing 57% of SPX index options average daily volume. The appeal of these instruments lies in their ability to hedge or speculate on intraday price swings, a feature that became critical during earnings weeks and macroeconomic events like the Federal Reserve's policy decisions according to Numerix.

Retail traders, now accounting for 25% of total market volume, played a pivotal role in this surge. Data from Numerix highlights that retail investors traded an average of 1.2 million S&P 500 0DTE options contracts per day in the final week of 2025, surpassing institutional volumes in this segment. Unlike the speculative "YOLO" call-buying of 2021, modern retail strategies increasingly involved limited-risk spreads and institutional-style positioning, signaling a maturation of the retail options market.

Investor Sentiment: Contradictory Signals from Put/Call Ratios

The CBOE Equity Put/Call Ratio for the week of December 23–29, 2025, stood at 0.64, indicating a bullish bias as of December 26 according to YCharts. This marked a 30.61% increase from the same period in 2024, when the ratio was 0.49 as recorded by YCharts. However, the SPX + SPXW Put/Call Ratio for the same week was 1.22, a bearish signal as ratios above 1 typically reflect heightened demand for puts according to CBOE. This duality underscores the tension between institutional bearishness and retail bullishness in the final stretch of 2025.

The VIX Put/Call Ratio further complicated the narrative. At 0.24 in the final week of 2025, it represented a 63.08% decline from 0.65 in 2024 according to YCharts. This suggests that volatility-linked instruments were being heavily skewed toward calls, potentially amplifying market instability as traders bet on a "Santa Claus Rally" as reported by Economic Times.

Gamma Pins and Market-Maker Dynamics

The final week of 2025 saw a "gamma pin" form around the S&P 500's 6,800 level, as market makers hedged massive 0DTE contracts. This created a tight trading range, coiling potential energy for a January 2026 breakout as detailed in a Financial Content analysis. The phenomenon was driven by the sheer volume of 0DTE options-accounting for 57% of SPX index options average daily volume-which forced dealers to adjust positions rapidly, intensifying intraday volatility.

Institutional positioning also played a role. Year-end "window dressing" saw funds load up on top-performing AI infrastructure stocks like Micron Technology and Palantir Technologies, further concentrating call volume in these sectors as reported by Investing.com. Meanwhile, the S&P 500 closed 2025 at record highs, achieving a 17.7% year-to-date gain, fueled by positioning, seasonality, and thin liquidity as shown in Macromicro charts.

Risks and Regulatory Tailwinds

The dominance of 0DTE options introduced systemic risks. Their rapid theta decay and leveraged nature increased the potential for sudden corrections, as seen in the record 110 million contracts traded on October 10, 2025 according to Moomoo. Critics warned that the frequent rebalancing of 0DTE positions by market makers could amplify price swings, particularly during high-impact events as highlighted by ION Group.

Regulatory shifts, however, provided a tailwind. FINRA's proposed changes to the Pattern Day Trader rule and a dynamic, risk-based margin framework were expected to lower barriers for high-frequency options trading, further institutionalizing retail participation as reported in Financial Content.

Conclusion: A New Paradigm in Derivative-Led Markets

The final hours of 2025 marked a turning point in the evolution of options markets. 0DTE options, once a niche tool, became central to derivative-led price discovery, with retail and institutional players navigating a landscape of heightened volatility and strategic complexity. As 2026 looms, the interplay of macroeconomic catalysts, regulatory reforms, and retail sophistication will likely define the next chapter of this dynamic market.