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Are 0DTE Straddles Overpriced? We Tested 193 SPY Sessions (2022-2026)
A data study of 193 SPY 0DTE sessions from July 2022 to April 2026 using minute-level historical data. The 10:00 ET implied move contained the close 71.0% of the time (68.3% if fairly priced), realized moves ran about 13% below what the straddle implied, and the worst single miss was a +8.72% day against a 3.51% implied move. Full method, tables, and the tail-risk caveat.
Are 0DTE straddles systematically overpriced? It is probably the most argued question in options trading since daily expirations took over SPY volume - and it has a testable answer. We replayed 193 Wednesday sessions from July 2022 through April 2026 on the FlashAlpha Historical 0DTE endpoint, snapshotting the same-day straddle at 10:00 ET and comparing its implied move to what SPY actually did into the close.
Method
Sample: every Wednesday 2022-07-06 to 2026-04-01 with a SPY 0DTE expiry and full data (193 sessions; holidays excluded)
Snapshot:GET /v1/exposure/zero-dte/SPY?at={date}T10:00:00 - ATM straddle price and implied 1-sigma move, from real minute-level quotes
Realized: close (16:00 ET quote mid) vs the 10:00 spot - the move the 10:00 straddle actually had to survive
Benchmarks: a fairly-priced 1-sigma move contains the close ~68.3% of the time, and the median absolute move of a normal variable is ~0.674 sigma - richness is measured against those, not against zero
The Headline Numbers
Metric
Measured
If fairly priced
Close inside the 10:00 implied 1-sigma band
71.0% of sessions
~68.3%
Sessions where realized move exceeded implied 1-sigma
25.9%
~31.7%
Median of realized move ÷ implied move
0.589
~0.674
Median implied 1-sigma move (10:00 ET)
0.72% of spot
-
Median absolute realized move (10:00 to close)
0.37%
-
Every line points the same direction: the 0DTE straddle at 10:00 ET has priced in slightly more movement than SPY delivered. The overpricing is real but modest - realized moves ran roughly 13% below the fair-value benchmark (0.589 vs 0.674), the band held ~3 points more often than chance, and breaches happened ~6 points less often than fair pricing implies. This is a volatility risk premium, alive and measurable at the daily horizon.
Is the Edge Stable? Year by Year
Year
Sessions
Hit rate (inside 1-sigma)
Median implied
Median abs realized
2022 (H2)
26
69.2%
1.17%
0.73%
2023
52
69.2%
0.73%
0.49%
2024
50
70.0%
0.60%
0.32%
2025
52
71.2%
0.62%
0.39%
2026 (Q1)
13
84.6%
0.71%
0.26%
The hit rate sits in a tight 69-71% band across four very different vol regimes (2022 bear, 2023-24 grind, 2025 tariff shock). The premium has not been arbitraged away as 0DTE volume exploded - it has been remarkably stable.
The Caveat That Pays for Everything: Tails
The worst session in the sample was April 9, 2025: the 10:00 straddle implied a 3.51% one-sigma move - already elevated, mid tariff panic - and SPY closed +8.72% on the tariff-pause headline, roughly 2.5x the implied move. A naked short straddle sized to "collect the premium" that morning gave back weeks of harvest in one afternoon.
That is the whole 0DTE seller's bargain in one line: ~74% of sessions the implied move is too big, ~26% it is too small, and a handful of those are catastrophically too small. The premium exists because someone has to hold that tail. Selling it naked is a leverage decision, not an edge decision - defined-risk structures (iron flies, condors) monetize the same overpricing with a survivable worst case.
Honest limitations. Wednesdays only (one session per week, avoids weekday mix effects but samples less); close measured against the 10:00 spot, not the intraday high/low a gamma-scalper would care about; quote mids with no fees or slippage; 2026 is a partial year. FOMC Wednesdays stay in the sample - notably, straddles on Fed days priced roughly double the neighboring weeks, and the market largely respected them. Rerun it your way: every endpoint below is public.
Replay This Study Yourself
# The 10:00 ET snapshot for any historical session
curl -H "X-Api-Key: YOUR_API_KEY" \
"https://historical.flashalpha.com/v1/exposure/zero-dte/SPY?at=2025-04-09T10:00:00"
# The close for the same day
curl -H "X-Api-Key: YOUR_API_KEY" \
"https://historical.flashalpha.com/v1/stockquote/SPY?at=2025-04-09T16:00:00"
The expected_move block carries the straddle price, the implied 1-sigma in dollars and percent, and the bounds; time_to_close_hours is computed from your timestamp, so you can re-run the whole study at 11:30 or 14:00 instead of 10:00 and measure how the premium decays across the session.
Mildly, yes. Across 193 SPY sessions from 2022 to 2026, the 10:00 ET straddle-implied move contained the close 71.0% of the time versus the 68.3% fair-pricing benchmark, and median realized moves ran about 13% below what the straddle implied. The overpricing is consistent year over year but small, and occasional tail days (like April 9, 2025, at 2.5x the implied move) mean naked sellers can lose weeks of premium in one session.
In this study SPY closed outside the 10:00 ET implied 1-sigma band on 25.9% of sessions - less often than the ~31.7% that fair pricing would predict. In other words, the expected move published by the 0DTE market is a slightly conservative (wide) estimate of where the close actually lands.
No. The premium is compensation for holding tail risk, and the tails show up: the worst session in the sample realized 2.5x the implied move. Roughly one session in four breaches the band, and the breaches cluster on news days. The data supports harvesting the premium with defined-risk structures sized for the worst case, not naked short straddles.
FlashAlpha Historical - point-in-time replays of the SPY 0DTE chain at 10:00 ET (real NBBO quotes at minute resolution) via /v1/exposure/zero-dte, and closing quotes via /v1/stockquote. 193 Wednesday sessions, July 2022 through April 2026. Anyone with Alpha-tier access can rerun the exact calls.
Conclusion
The 0DTE volatility risk premium is real, stable, and small: the market pays roughly a 13% markup on daily movement, session after session, year after year. It is also fully earned by whoever eats the April 9ths. If you trade this, the study's practical output is a number, not a slogan: the implied move is wide ~74% of the time, and the way to collect that without donating it back is defined risk and honest sizing. Rerun the study, change the snapshot hour, slice it by VIX regime - the endpoint replays every session since 2017.
