0DTE stands for zero days until expiration. These are options that expire that same day. (Likewise, 1DTE, 2DTE, etc. stand for one day until expiration, two days until expiration, etc. Options that expire in one day, two days, etc.)
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0DTE charts are available for Volland 3, Volland 30, and Volland Live. They update on the timeframe of your subscription (i.e., 0DTE charts are updated every 30 minutes in Volland 30). To see a 0DTE chart in Volland, select your ticker, your greek, and today’s expiration only.

These are the core principles and assumptions underlying this framework. These principles are realistic and have shown to be true with our own observations and discussions with MMs. Under these principles will be their rationale.
 
Principle #1:
Dealers need to be fully hedged by the end of the day, including in 0DTE.
In the old days, dealers had to hedge all their 1st- and 2nd-order greeks within a range and fill out a form of their book to prove it. If they failed one greek once, they were warned. If they failed twice, they were fired, and likely not hired to any other MM firm! Also, note that we do not yet know for sure the dealer’s position in the underlying.
 

1. Dealers warehouse their intraday risk until 2-3 p.m.​ There is so much volume (particularly in 0DTE options) that dealers don’t complete their hedging task until the end of the day. This was also noticed by the CBOE data department. This creates opportunity, but the fact that these strikes may not act as strong as they seem until closer to the end of the day. I refer to this timeframe as “dealer o’clock”. The reason for this is if dealers dynamically hedge with all the 0DTE volume coming in, they will be swiftly whipsawed and lose money on positions.
2. Dealers may hedge their exposure sooner if there is strong volatility. If the market goes far out of bounds, dealers will hedge before dealer o’clock. I would consider “out of bounds” ~2STD of the opening straddle price. Dealers do like strong movement, because then they can consistently hedge in one direction without fears of being whipsawed out of positions.
3. Before 2:00 p.m. Eastern, delta and gamma have the largest effect on 0DTE – but has minimal impact on forecasting where price will go. Afterward, charm and vanna have a larger effect. This assumes significant volume in 0DTE options, and must be checked against the cumulative effect in the exposure charts. That is, check the y-axis (notional dollars hedging) in the exposure charts by greek for the largest dollar impact at that time.

 
Principle #2:
Dealers will trade options to become risk neutral in aggregate vanna and charm.
Vanna and charm are two sides of the same coin, that being premium of the option. The option premium is made up of two components: time and IV. Both are difficult to hedge when moving quickly, and both move quickly on 0DTE.

1. Dealers hedge to deltas, not PnL. The PnL follows the delta hedging. Therefore, vega and theta are not the greeks to focus on – vanna and charm are. Dealers do have to report their aggregate vega and theta positioning; however, they tend to be hedged through VX futures and other options. On the 0DTE timeframe they tend to hedge using other options to have dynamic hedging in premium.

 
Principle #3:
Premium is 0 when options expire.
This is the primary difference between 0DTE and higher-order Volland. On a higher order Volland (particularly on the 30-day timeframe), there is a consistent spot-vol correlation that is the basis for skew, vanna moves, etc. 0DTE is simpler because IV and time premium run to 0. So, you know exactly the direction of IV and the impact on underlying hedging requirements.

1. Charm and Vanna will both need to be hedged in the same direction as IV approaches 0. Vanna is typically lower than charm in notional hedging needed, but because premium will run down to 0 no matter what underlying price does, charm and vanna will require hedging in the same direction. For this reason, I focus on charm, but targeting vanna can produce similar analysis.
2. Charm/Vanna Balance allows less need for strong end of day hedging. Because premium trends to 0 no matter what on 0DTE, the flows could be very strong towards the end of the day.
3. Gamma impact is inversely correlated to the remaining IV in the 0DTE vol plane. On all fronts, gamma impact is inversely correlated to the IV levels. IV reduces the impact of gamma quite a bit. Toward the end of a boring day where IV melts sooner than normal, gamma may have an impact. The nature of gamma requires an outside force to make any sort of analysis on it effective, and sometimes that force is the vanna/charm impact as IV trends towards 0 anyway.

 
Principle #4:
0DTE options are cheap greeks.
While one 0DTE ATM option has a higher gamma than a 20DTE ATM option, its sphere of influence is much smaller. Therefore, as price moves, the greeks of the 0DTE option mean less. This is important because the initial option positioning will have less of an effect the further price moves away from it.

Swing trading is a style of trading that involves holding an asset for an intermediate time frame of one day to several weeks in order to profit from price movement, or "swings".

These are the core principles and assumptions underlying the swing trading framework with Volland. These principles are realistic and have shown to be true with our own observations and discussions with MMs. Under these principles will be their rationales.
 
Principle #1:
Dealers need to be fully hedged by the end of the day. This is also true in 0DTE.

• Dealer deltas at the beginning of the day are already hedged. Since dealer deltas are fully hedged, the delta chart on Volland is only good to help guide conversations about how customers are positioned (through the inverse of Volland data).
• Dealers hedge their vega positions, but not as fully as their delta positions. While dealer deltas have a clear and easily measurable hedge, it is not as clear with vega. In SPX, vega is hedged with other options, /VX futures, and skew-adjusted deltas on their individual models. It is impossible at this point to track counterparties and dealer positioning in those areas, so Volland at this point assumes 85% of vega is hedged. This is a conservative estimate and extends to vanna as well.
• Exercise of options are net neutral. While dealers may release /ES hedges from an excessive delta position that expires, they are typically already prepared for it through other options and 0DTE trading. Our informal studies of expiring delta positions in SPX have shown no correlation to opening price the next day.

 
Principle #2:
Dealers hedge to deltas, not PnL. The PnL follows the delta hedging; therefore, dealer delta, vega, and theta are not the greeks to focus on. Gamma, vanna, and charm are. Dealers do have to report their aggregate vega and theta positioning, but they tend to be hedged through /VX futures and other options. On the 0DTE timeframe, they tend to hedge using other options to have dynamic hedging in premium.
 
Principle #3:
The 2nd order greek with the most impact is the one with the highest notional hedging.

• Gamma, Charm, and vanna notional (15% on SPX) account for all delta hedging in existing positions. As a result, this formula for existing positions is assumed to be true: 
  
  •     (Gamma Exposure * Underlying Change)
    
  • + (Aggregate Vanna * Fixed Price Vol Change) 
    
  • + (Aggregate Charm Exposure * Number of Hours Passed)
    
  • = Total Delta Notional Hedged
    
• When there are new trades applied during the day, those deltas will be accounted for by dealers. However, the existing positioning is the primary concern for swing trading. Note: we have changed charm to be an hourly measure from a daily measure.
  
• Gamma, vanna, and charm exposure change at the end of the day will be hedged - not at the beginning. The less markets move, the more trivial this principle is, but there could be some changes to existing dealer positioning between your last update during regular trading hours and the actual dealer needs. Because of this principle, you need to be able to predict the changes in the notional value based on the behavior of the Greek, the strike it is on, and the total notional at that strike.
  
• The ratio of each 2nd order Greek’s notional hedging to the total affects its impact on dealer hedging. If you read a gamma chart perfectly and it has little effect, it could be because vanna impact is far higher. The y-axis will show you the impact of each of these 2nd order greeks is most impactful to dealer hedging.

 
Principle #4:
Dealers account for 35-40% of all underlying movements. This was based on a discussion with the CBOE data team. While dealer hedging accounts for a majority of the underlying movement, there are other traders, including passive investors, hedge funds, stock traders, fundamental traders, technical traders, CTAs, ETF rebalancers, funds, and many other participants, Volland is only dealing with option dealer hedging requirements. Those other traders may oppose Volland, and it may not be a perfect match all the time. Volland shows just one piece of the market movement puzzle – a significant one. 

Who are Dealers?
 
When an option order is received, a middle man, called an “options dealer”, “options market maker”, or “options wholesaler”, is financially incentivized to accept the order. These entities (individuals, firms, etc.) provide essential liquidity for markets to function. Because they are exposed to adverse selection, they are motivated to hedge their risk. In fact, at the end of every day, this form used to be filled out by the risk manager for each market maker. If any of the categories fell outside an acceptable threshold, the dealer is warned the first time, and fired after their second violation. If fired for this reason, they would not be hired by another dealer firm.

These acronyms and terms are specific to the Volland options dealer positioning platform and/or are commonly referenced by Volland users.
 
For common terminology in the options trading world, please visit the Glossary published by The Options Institute.
 
For common terminology in the futures trading world, please visit the Glossary published by CME Institute.

Commonly Used Acronyms
 
​0DTE: Zero days until expiration. Options that expire that same day.
1DTE, 2DTE, etc.: One day until expiration, two days until expiration, etc. Options that expire in one day, two days, etc.
AH: After hours
AMC: After market close
ATM: At the money
BD: Broker-dealer
BMO: Before market open
BTC: Buy to close
BTD: Buy the dip
BTO: Buy to open
CBOE: Chicago Board of Options Exchange
CME: Chicago Mercantile Exchange
CPI: Consumer Price Index
CTA: Commodity trading advisor
DAG: Delta-adjusted gamma
EOD: End of the day
/ES: E-mini S&P 500 Index Futures
ETF: Exchange-traded fund
FOMC: Federal Open Market Committee
GTC: Good-til-cancelled
HOD: High of the day
HV: Historical volatility
ITM: In the money
IV: Implied volatility
LIS: Line in the sand
LOD: Low of the day
MM: Market maker
MOpEx: Monthly options expiration
OpEx: Options expiration
OPRA: Option Pricing Regulatory Authority
OTM: Out of the money
PnL: Profits and losses
RTH: Regular trading hours
RV: Realized volatility
SPX: Standard & Poor’s (S&P) 500 Index
SPY: SPDR S&P500 ETF
STC: Sell to close
STD: Standard deviation
STO: Sell to open
SVC: Spot-vol correlation
VIX: CBOE Volatility Index
VWAP: Volume-weighted average price
/VX: CBOE VIX Index Futures


Commonly Used Terminology
 
Dealer o’clock: Options market makers must end the day hedged. At approximately 2:00-3:00 p.m. Eastern, dealers begin to aggressively hedge their book.
 
Line in the sand (LIS): The strike at which dealers change their behavior – either from buying to selling, or selling to buying.
 
Magnet: The strike that price will be attracted to, usually in reference to positive vanna strikes.
 
Overvixed: There is a clear correlation between the VIX and percent change in SPX. Overvixed – overstatement of VIX – is when VIX runs higher than the SPX change implies.
 
Paradigms: Because of a 0DTE principle which states dealers tend to trade options to become risk neutral in aggregate vanna and charm, you will find that 0DTE charts are frequently uniform in nature. There are few occurrences where the charts are staggered. At different times in specific conditions, customer behavior can fall into one of four paradigms.

• Bank of America (BofA) Paradigm: In a paper by BofA, they stated their belief that customers are long calls and puts on 0DTE.
• Sidial Paradigm: In a paper by Kris Sidial, he stated his belief that customers are short calls and puts on 0DTE.
• GEX Paradigm: First written in a paper by SqueezeMetrics, this “gamma exposure” paradigm is when dealers are short puts and long calls.
• Anti-GEX Paradigm: The opposite of GEX, this paradigm is when dealers are long puts and short calls.

 
Rolling calls: Changing a call position to either a higher strike or further out in time.
 
Skew: The rate of change of implied volatility on an option chain. Vertical skew refers to the implied volatility change within an expiration from one strike to another. Horizontal skew refers to implied volatility change at a fixed strike over different expirations.
 
Spot: Current price of the underlying.
 
Spot-vol correlation (SVC): The linear regression between VIX points and percent change in SPX on a daily timeframe.
 
Strike: The relevant price on an option contract.
 
Undervixed: There is a clear correlation between the VIX and percent change in SPX. Undervixed – understatement of VIX – is when VIX runs lower than the SPX change implies.
 
Vol: Volatility.