On March 7, 2024, Roundhill Investments launched the first 0DTE (zero days to expiration) covered call exchange-traded funds (ETFs). These funds introduce new strategies to the ETF space, enabling fund managers to respond to rapidly changing markets with greater speed and agility.
Traditional covered call trading involves owning an underlying asset (such as individual stocks or ETFs) and selling call options that expire in somewhere between a few weeks and a month. This approach to selling call options for income was effective when the financial markets and related information moved more slowly than they do today. (In a recent blog post, Roundhill referred to traditional covered calls as a strategy built for yesterday.)
0DTE trading involves buying or selling put options when the market opens; those contracts expire when the market closes that same day. As the blog post noted:
According to Cboe’s 2025 report, “0DTEs Decoded,” ~60% of S&P 500 options volume now comes from 0DTE contracts. The S&P 500 trades over 1.5mm contracts of 0DTE options every day – compare that to just five years ago in 2020 when that number was sub-350k contracts. This surge in volume demonstrates a substantial shift in investor sentiment towards trading daily options.
Using 0DTE enables traders of these ETFs to respond to market changes quickly. Strike prices for the sold calls are reset daily. Additionally, the ETF’s underlying asset will be “uncovered” overnight, preventing unexpected news from negatively affecting a covered call position while the market is closed.
Options lose their time value fastest during the final hours before expiration. Because the ETF sells calls, this allows the fund managers to collect time value premium every day. As a result, ETFs using 0DTE typically have higher distribution yields (and weekly dividend payments), compared to ETFs using traditional option selling strategies on the same assets.
The most significant limitation of 0DTE ETFs is that there are only three ETFs with options that expire daily. These have weekly options that open every day and expire a week later. The three ETFs:
- SPDR® S&P 500 ETF (SPY)
- Invesco QQQ Trust ETF (QQQ)
- iShares Russell 2000 ETF (IWM)
This means the range of 0DTE covered call ETFs is currently very limited. A couple of fund sponsors, Roundhill Investments and YieldMax ETFs, have 0DTE funds using each of the three underlying ETFs.
To get started with these “new age” ETFs, take a look at the Roundhill Innovation-100 0DTE Covered Call Strategy ETF (QDTE).
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