0DTE Liquidity: Bid-Ask Spreads, Fill Quality, and the Slippage That Ruins Backtested Edges
0DTE options on SPX and SPY look highly liquid, and at the money they genuinely are. But the surface picture hides three things that cost real money: spreads that widen away from the money and late in the session, displayed size that barely reflects true liquidity, and fills that blow out catastrophically in exactly the fast markets you most need to exit. The through-line is slippage, the hidden cost that makes a profitable backtest an unprofitable strategy.