Study finds SPX options dealers complete hedging trades within 2-3 minutes

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Researchers analyzed 1,088 SPX trading sessions from 2022 to 2026 to measure how quickly market dealers hedge customer options flow in the underlying index. Using one-minute interval data, they tracked dealer delta inventory changes and measured their impact on index returns across horizons of 1 to 30 minutes. Results showed the hedging footprint was strongest in the first two minutes and statistically undetectable by the fifth minute, confirming a front-loaded hedging pattern. A placebo test using randomized trade-direction signs produced no predictive signal, indicating the directional data — not trade volume — drives the measurable effect. The authors note the 0.04 basis-point effect size offers no practical trading edge but represents what they claim is the first published latency estimate of its kind for SPX zero-day options.

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