How fast does Theta decay accelerate in the final hours of a 0DTE option?
Faster the further out of the money the strike is. In the calculator's default (SPX at 5,850, a 5855 call bought for $15.00 with 240 minutes left, about 15% implied volatility), Black-Scholes with spot unchanged values it at $9.96 with 120 minutes left, $6.42 with 60 and $2.30 with 15. An at-the-money option keeps about √(time left) of its value (70.7% at half the time, 50% at a quarter); a 25-point out-of-the-money call in the same setup keeps only 18% with an hour left.
Does SPY have 0DTE options?
Yes. SPY lists options expiring every trading day: Cboe's exchanges added Tuesday and Thursday weekly expirations for SPY and QQQ in November 2022, next to the existing Monday, Wednesday and Friday ones. SPX has had expirations every weekday since Cboe added Tuesday and Thursday SPX Weeklys in 2022. Check your broker's option chain for the series listed today.
Cboe: SPY and QQQ Tuesday and Thursday expiring weekly options
Is SPY or SPX better for 0DTE options?
Neither is better for everyone; they differ in size, settlement and tax. SPX is about 10 times SPY's size, European-style and cash-settled, so there is no share assignment, and in the US it is a Section 1256 contract (60% long-term / 40% short-term). SPY is about a tenth of the size, which suits smaller accounts, but it is American-style with 100-share physical settlement and after-hours assignment risk, and same-day gains are short-term. Your account size, broker fees and tax situation decide; this is not tax advice.
How do I calculate theta decay?
Theta is how much an option's value changes as time passes with everything else unchanged. In Black-Scholes it has a closed form (for a call, −S·φ(d1)·σ ÷ (2√T) − r·K·e^(−rT)·N(d2) per year, divided by 365 for a calendar day). For a 0DTE option a per-day number is too coarse, so this calculator reprices the option at each checkpoint instead: in the default, $15.00 now minus $9.96 with 120 minutes left is $5.04 a share, or $504 per contract, of decay if SPX stays flat.
Which option has the highest theta decay?
In dollars, an at-the-money option close to expiry with high implied volatility. Theta per share grows roughly with 1/√(time left) and with volatility, and it peaks near the strike. Out-of-the-money options lose fewer dollars but a larger share of their value: in the default setup a 25-point out-of-the-money SPX call loses 82% of its value in the three hours from 240 to 60 minutes left, against 50% for the at-the-money call.
What is 4:00 PM ET pin risk and after-hours assignment risk on SPY and QQQ 0DTE options?
SPY and QQQ options are American-style and settle into 100 ETF shares per contract. Holders of expiring options can decide whether to exercise until 5:30 p.m. ET (FINRA Rule 2360), after the 4:00 PM close. If SPY closes near your short strike and moves after hours, you can be assigned 100 shares per contract ($58,500 notional at an example $585) after your protective long wing has expired worthless. SPX daily options are European-style and cash-settled from the 4:00 PM ET closing value, so there is no share assignment.
FINRA: exercise cut-off time for expiring options
How much tax does trading SPX (or XSP) 0DTE options save compared to SPY or QQQ?
Under IRS Section 1256, broad-based index options such as SPX, XSP (Mini-SPX, 1/10th of SPX), NDX and RUT are taxed as 60% long-term and 40% short-term capital gains however long you held them. SPY and QQQ ETF options held intraday produce short-term gains, taxed at ordinary income rates. The saving depends on your bracket; this is general information, not tax advice.