0DTE Volatility Surges as Traders Hedge Near-Term Market Risks

• 0DTE options are increasingly used to manage exposure to near-term volatility events, such as CPI/PPI data and Fed announcements according to market analysis.
• Traders are shifting focus toward ultra-short term instruments to fine-tune risk management and avoid overnight uncertainties as noted in trading strategies.
• The use of 0DTE options has grown significantly, with E-mini S&P 500 options trading volume rising by 120% in 2025.

The growing use of 0DTE options reflects broader market concerns over volatility and uncertainty. With macroeconomic and geopolitical risks evolving rapidly, traders are favoring same-day expiration contracts to hedge against or speculate on volatility-driven events as market data shows. These instruments allow for greater precision in managing exposure to key economic and central bank announcements.

The shift toward 0DTE options is particularly evident in the E-mini S&P 500 options market. The average daily volume of contracts with zero to five days to expiration increased from 350K to 770K in 2025. Similarly, 0DTE contract volumes grew from 100K to 370K in the same period. This reflects a broader industry trend toward liquidity and market depth in short-dated products.

Why Are Traders Favoring 0DTE Options?

Traders are seeking instruments that can account for rapid price discovery in a volatile environment. Traditional, long-dated options are seen as less effective in managing near-term risk. 0DTE options allow traders to hedge against or speculate on specific volatility events while eliminating exposure to overnight risks according to industry experts. This shift in strategy is driven by the need for precision and flexibility in risk management.

The increased use of 0DTE options is also linked to the broader macroeconomic environment. Persistent inflation, ongoing uncertainty about central bank policies, and frequent volatility spikes have forced a fundamental change in how participants protect their portfolios as market reports indicate. By using 0DTE options, traders can respond more effectively to rapidly changing market conditions.

What Alternatives Exist for Managing Volatility Risk?

While 0DTE options are popular for short-term hedging, investors also seek alternative methods to manage volatility risk over the long term. The ProShares VIX Mid-Term Futures ETF (VIXM) offers a more stable and strategic approach. VIXM tracks a portfolio of VIX futures with a weighted average of five months to expiration, making it a ballast in a high-floor volatility environment according to market analysis.

VIXM is particularly relevant in 2026, where the volatility market is defined by frequent spikes in the VIX. It has a negative correlation to the S&P 500, which can offset losses in core stock holdings during a correction as data shows. This makes it an under-the-radar but effective tool for investors looking to hedge against rolling crises and persistent volatility.

In summary, the rise of 0DTE options reflects a broader shift in how market participants manage near-term volatility risks. As macroeconomic and geopolitical uncertainties continue to shape market dynamics, traders are increasingly favoring ultra-short term instruments to hedge or speculate on specific volatility events. This trend is likely to continue as market conditions evolve and demand for flexible risk management tools grows.