What is 0DTE Options Trading?
0DTE (Zero Days to Expiration) refers to options contracts that expire on the same trading day. These options have become one of the most popular instruments in the market, now representing over 50% of SPX options volume.
0DTE options are characterized by:
- Maximum Gamma: Extreme sensitivity to underlying price movements
- Rapid Theta Decay: Time value evaporates throughout the trading day
- High Leverage: Small price moves create large percentage gains/losses
- Same-Day Resolution: All positions close by 4:00 PM ET
Why Traders Love 0DTE Options
1. No Overnight Risk
Positions are closed by end of day, eliminating gap risk from overnight news or events.
2. Capital Efficiency
Low premiums mean you can trade with less capital while maintaining significant exposure.
3. High Gamma Environment
ATM 0DTE options have the highest gamma of any options, making them highly responsive to price moves.
4. Scalping Opportunities
Quick moves in the underlying can generate rapid profits on 0DTE positions.
Key 0DTE Metrics to Monitor
Expected Move
The expected move is calculated from the ATM straddle price and shows the market's implied range for the day. If SPY is at $475 with a $6 straddle, the expected move is approximately +/- $6 or 1.3%.
Gamma Exposure (GEX)
Gamma exposure shows where market makers need to hedge. High positive gamma at a strike means dealers are long gamma (will sell rallies, buy dips). High negative gamma means dealers are short gamma (will amplify moves).
Gamma Flip Point
The price level where net gamma changes from positive to negative. Above gamma flip, moves tend to be dampened. Below it, moves tend to be amplified.
Max Pain
The strike price where option holders experience maximum loss. Stocks often gravitate toward max pain on expiration days due to dealer hedging.
Popular 0DTE Trading Strategies
1. Iron Condors
Sell OTM calls and puts to collect premium. Works best when you expect the underlying to stay within a range. Use the expected move as your guide for wing placement.
- Entry: Sell strikes beyond 1 expected move
- Target: Let decay erode premium to 50%
- Risk: Limited but can be total loss of credit received
2. Straddles/Strangles
Buy ATM calls and puts expecting a big move. Best before known catalysts or when IV is low relative to expected movement.
- Entry: Buy when expecting move > expected move
- Target: Quick exit on directional break
- Risk: Total loss if underlying doesn't move
3. Gamma Scalping
Buy ATM options and scalp the underlying to capture gamma. As price moves, delta changes rapidly, allowing you to scalp profits on the stock while maintaining options position.
4. Directional Plays
Simple long calls or puts for directional bets. Use technical levels and gamma flip points to time entries.
0DTE Risk Management
Position Sizing
Never risk more than 1-2% of your account on a single 0DTE trade. These are high-risk, high-reward instruments.
Stop Losses
Use defined stops. A 0DTE option can go from profitable to worthless in minutes.
Understand the Risks:
- Total Loss: 0DTE options can go to zero very quickly
- Wide Spreads: Bid-ask spreads widen near expiration
- Gamma Trap: Short gamma positions can explode on fast moves
- Assignment Risk: ITM options may be exercised
Analyze 0DTE Options in Real-Time
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