How fast do dealers hedge SPX 0DTE flow? We measured it: 2-3 minutes
Every dealer-positioning story assumes the same mechanism: customers force option delta onto dealers, dealers hedge it in the underlying, the hedge moves the index. The premise is stated everywhere and measured almost nowhere — the canonical footprint study (Hu 2014) is equities, pre-0DTE, daily grain. So we measured it on SPX 0DTE directly: when a customer imbalance lands this minute, how many…
A study measuring the time it takes for dealers to hedge SPX 0DTE flow found that it takes approximately 2-3 minutes for the index to absorb the hedge. The researchers analyzed 1,088 SPX sessions from 2022 to 2026 at one-minute intervals, measuring the dealers' option-delta inventory and regressing forward index returns over 1-30 minute horizons.
The results showed that the hedge is strongest in the first two minutes, becoming statistically insignificant by the fifth minute. A hold-out of 40 sessions confirmed that the sign of the imbalance is crucial for the hedging process, while random signs fail to produce any results. This measurement is the first of its kind for SPX and provides insight into the latency of the hedging machine.
Written by urgent.news from Dev.to's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
