How We Trade 0DTE Vertical Spreads (without over spending) | Zero Days to Expiration Options
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- Опубликовано: 28 май 2024
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📝 Description
00:00 Vertical Spreads for Small Accounts
02:06 Why Sell Vertical Spreads?
03:05 How Wide Should You Trade?
04:13 Best and Worst Vertical Spreads
05:21 Direction Exposure vs 45 DTE
08:47 Risk Reward Ratio
12:35 Takeaways
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In my experience, 0 DTE is for traders that want to stay in their seat the whole time the trade is on and are only managing THAT TRADE. You know, people that like to be done by 11:30 EST and want no overnight risk. My B&B is a 10-12 delta IC placed around 9:40 and pulled during the 10:30 rebound. If I miss the 10:30 exit, then I usually get another chance around 1:45 EST.
Do not trade to make a fortune. Trade to make an income. First try to cover your daily expenses. Then add. If you can be consistent and disciplined, continue. If not, take a job.
After doubling my account and then losing everything 3 weeks in a row... I'm more interested in 45DTE.
were you selling or buying 0 dte? where you doing credit spreads or options by themselves?
greedy....
What was the strategy 🤔
i dont think there was one, like tasty trade people over complicate these!!@@DrEpic123
Not greedy just too large of a trade for your account. If you risk everything everyday, you’ll go bankrupt several times a week 😅
You should market your TastyTrade hat. Looks cool. I’d buy one.
They do! It's on their website
@@naufeltajudeen3769 then I shall look again, thank you kindly.
I recall trying this years ago, but tasty would close out the trade even when they were OTM, and I was forced to take losses on winning trades... thanks
😂
it makes sense when you look at it this way. tradeoffs are collecting a fraction of the credit but more directional risk. of course the trades of 0dtes come off faster and require more management and fees
Thanks for this, very valuable information. 🙏
Word to the wise. The temptation to chase your loss on these things will have you blowing up your account in no time. My advice is you lose, you snooze.. meaning if you lose that day, sleep on it and try again tomorrow.
Great study. I like the risk to reward of 0 DTE butterflies vs the 0 DTE put spreads. Has the team done a study on 0 DTE broken wing butterflies?
Thank you was having this question in my mind
This is really helpful. Is there a wiki or forum i can read more from?
On 0 DTE's you need to do extreme high probability at .02 to .05, have even done .01, Deltas on selling put or credit spreads. I have been testing this and have had 100% wins in two weeks of testing. I usually wait till 11:00 to 11:30 am to let the market decide where it's going and I use a SPX $5 wide, then I can adjust at 1:30, if needed. I close early if I can or let them run till expiration. And use a commission free Broker. Just increase your quantity of contracts bought and like any trade, be ready to roll!
As far as managing I have no problem being in my seat and viewing the screen all day, since as a business intelligence and artificial intelligence consultant, I am sitting in front of my screen at home all day anyway with my chart monitor to one side.
When you say 11 am you mean in EST or PST??
EST @@lmaostrnoob
@@lmaostrnoob If interested I have a much better way of winning, that I have proven with extensive testing.
Has it still been working for you?
Instead of +/- $ amount it should have been measured in +/- % movement. That would have normalized the movement. 2$ movement 10 years ago is different than 10 days ago, but 1% move is the same.
Yes, 1% is 1%, it depends if you make 1% in 1 million account or in a 25K account. Just a small difference. $10,000 compared to $250
This isn’t measuring anything from 10 years ago- it’s measuring 0 DTE options data that they have from the past few months.
Excellent study as always! The one thing nobody talks about in ZDTE's is the COST. Surely that has to be a huge unspoken factor....
bang on. What do you use? I came here today with this specific question: 'What's the cheapest platform to open, roll SPX Options?. Commission seem to be increasing all the time.'
@@nayan9391prob tasty cuz they dont charge you to close options
If the short leg of Spy is ITM anytime after the trade is opened there is assignment risk, especially on 0DTE, correct?
Selling, and at the money and buying one strike out of the money on zero days to expire yields and net credit greater than 50% of the max loss even net of commissions. The strategy seems to deliver a positive expected value with enough occurrences, correct?
Would be interesting to see a study where overnight risk is factored in. With 0 dtes there is none. But how much is there in 45 dtes?
That’s an excellent point that’s not addressed in this video. There’s a lot of scheduled news and market moving events that happen in a 45-day period. Not to mention the unscheduled events that no one see’s coming.
0 DTE is 0DTE, why to bother 45dDTE. There are 2 different strategies. Watch when a fly makes the most profit? And the, this is a delta neutral strategy, so the market goes nowhere.
put another way... are you better at guessing what might happen in the next 4.5 hours or what might happen 45 days from now
@@dumbcat Yea but 45 days, you could be way wrong and still win. Gamma kills you in 0dte!
you should show the options in pennies not dollars like you did in your example. Keep it consistent and accurate. If you trade options and don’t know the $.27 equals $27 then maybe you should trade something else.
0DET on spreads are like gambling in my trading experience. What worked out the best for me is 1 -2 weeks DET 20 delta. At 50% profit I close the trade and rinse and repeat.
i agree it seems these 0dte set-ups coincide with DraftKings etc. I watch a tennis match or any sporting event and all I see are light hearted gambling commercials. And kids are hoping on board. 0dte plays right into this. I have no interest. It's a slippery slope imo. I'm starting to toy with 1-2 week credit spreads but I will buy some protection and reuse the protection. I think of it like this. In your 50% profit scenario ur probably making 5% profit when u win but...when you lose many of those 5% wins get wiped out. I'd rather go for 2% wins including the cost of a hedge and avoid BS events at all times. I haven't perfected this yet (hedging imo is the most important skill and least talked about) but my radar tell me 5% bi-weekly returns are unrealistic. The BS GAP is gonna bite. But I agree with you this is just gambling on steroids. I normally trade diagonals with a hedge but my sense is we will enter a calm period the next few months so credit spreads may be a good strategy. This was a good video that confirmed my instincts. I'm not interested, lol.
Play what is working for you. Do you eat something that you do not like. 1-2 weeks for me has the same stress like 0 DTE. In 1-2 weeks it is enough to have 2-3 gaps in he same direction.
@@constantins5549 in short...if u can't hedge it don't trade it. 0dte leave no room for hedging. 1-2 weeks can be hedged but in general i don't like credit spreads. i prefer diagonals bc they most resemble the Covered call which is easily hedged. Credit Spreads are very difficult to hedge.
however what about selling spx apporx 20-25 W maybe 10 delta ish
You need to be right and right often. You really can't go off option theoreticals either. You need to account for slippage and in the case of your $1 wide vertical of $27 your win rate needs to be 73% to breakeven or 7% edge on the 66% POP because your premium would be $33 if you weren't paying somewhere. Another way to think about it is the house having a 7% edge against your trade for that example. To the gamma risk side of this video yeah if you're a directional guy this is your domain otherwise yeah stay away
It's wild to me that this channel has not broken through a million followers.
So If I get this right, if one insists on placing zero-Day-To expire type spreads, you better be using 45-day to expire spreads instead or if the market moves against you, rolling will be useless.
Writing these 0-3 DTE options that everyone loves is the new meta but its got a decent barrier to entry both knowledge and capital. Doing it safely is very difficult. Shovels in a gold rush sort of idea.
We been doing 0DTE way before daily expiration. People been 0 dte since weekly expiration became available
Two things can be true at once 😅
@@Canalyoutubechido the difference being now one can stay consistently at the steepest part of the exponential decay curve relative to time and capital. I personally prefer the 36-24 hours till expiration area myself for day trading short options. To maximize my average hourly theta : delta ratios relative to value at risk.
@@aironenise indeed in this game no one is ever always right, nor are they ever completely wrong lol.
I find combining technical analysis with this general strategy in order to time entries results in super high winning percentages. I like to use Demark in conjunction with Nadaraya envelopes on 3 - 5 min time frame and stagger into the trade with the first side in the direction of the primary trend and then the other side as a counter trend, assuming I get the initial move that Demark and Nadaraya were indicating.
how does that change if you do a 30 wide? does that make the credit 3/8 relative the 45DTE. and then if its a 30 wide Call/Put Butterfly, does that make the credit 6/8 or 3/4 the credit of the 45DTE. how does that change the risk to return?
30 wide is major max loss!
sounds good but complicated for average jo'zzs. but thanks to keep lights on.
What's the cheapest platform to open, roll SPX Options?. Commission seem to be increasing all the time.
Apparently fidelity doesn't pass through the exchange fee for SPX, but the weak platforms and service could end up costing you. TDA lets many customers negotiate down the broker commission, but the fills can be poor. IBKR pro has tiered broker commissions which can be lower but would still pass through the exchange fee (liquidity taker/maker fees would not apply to SPX)
So.... There's no perfect solution. Makes more sense to try some platforms and then try to optimize cost and/or switch after you have some key strategies that begin to matter more than the platform or broker
great video as always. Thank you so much
If in a vertical can stock be put to you on the short side?
For SPY, QQQ, yes. Not XSP (which is "mini SPX) or SPX as both are cash settled.
play with futures rather than zero dates
why? Did you calculate the return for the same cost, when the market moves?
Over 10B cap movers in pre market gives an early idea what market going to do next if we can wait 60 min after opening, 45 DTE predictions is different
Good observation
Video does NOT answer the title. you did NOT explain how you trade 0DTE. Why dont you pay more attention at the title writing?
whats the advantage of selling SPY vertical spreads versus SPX? isnt there tax advantages in trading SPX?
You dont have to be a millionaire to trade SPY options or XSP. SPX are technically "not a security" and are marked to market 60/40 like futures for tax purposes. No wash sales ever. Re SPY you need to talk with a trader tax professional regarding wash sale rule IMHO to be technically compliant with tax regulation. It's quite complicated.
SPX settles as cash where spy settles as shares. I'm pretty sure if you let your SPX spread expire, won't count as a day trade where SPY would.
@@CuriosityCraft It counts as a day trade. Trading futures does count as a day trade.
@@jaymes7521 spx if you let expire worthless doesn't count as a day trade.
@@jaymes7521 Trading futures is a day trade, so what? You can open and close as many futures trades in 24hrs. Not with SPX if you do not have at least 25K account.
ok but the thing is, if you know the direction, like you would have to, you might as well go long and kill it. lol huh?
@Laughy2. Wrong. You have to trade high probability trades. Everything is statistics mostly in 0 DTE and greeks of course.
By combining the ability to read the tape with a deep understanding of chart formations on both anchor and smaller time-frame charts, one can significantly increase the probability of success, especially when trading 0DTE verticals. In my experience, the win rate can be as high as 99.999%. This multi-layered approach to analysis provides a strong edge in the market when applied to 0DTE vertical strategies.
I would like to learn this strategy.
99.999% 😂 lemme guess you’re selling this magical strategy
You collect 1/8 the credit, for 10x the risk, but the full trade plays out 45x faster?
Dear sirs, may I ask, who are these "directional geniuses" you mentioned, are they real people or are they kind of like Barbbie the dol.
l
What is POP?
probability of profit
@@fryloc77 thank you, stupid abbreviation. Most probable is the POL which is much more easy to accomplish. You need only one mistake.😊
SPY, SPX and QQQ daily 0DTE are amazing
The problem I have with QQQ, is they are not cash settled, so I will never use them.
POP of 62% and max loss is 3 time bigger than max win ///// YEAJH maine sure thing that mnakes sense daaawgs
Why would anyone trade 0dte(s)?
So what is the takeaway here... all risk/reward is happening at a much faster rate than 45 day.. duh!
yes, you will suffer only 1-2 hrs
The best sign to not go for the 0 dte strategy : everybody is doing it.
Really. I made several thousands in 2 weeks. I lost double because I am idiot like all those who loose money and I do not follow the rules. It was that day when SPX went up more than 120 points (Powel spoke at whatever event and I found out too late.
SPX Zeros are my daily bread.
Oh yea.. are you making good money doing this.
@@johnt697 Average $500 / day. I use all the tricks in the book. Sell Iron Condors 15 delta 10 wide in the morning if I don't see a trend developing. If there is a trend, I sell at the money 5 wide vertical. If I'm wrong I hedge the other way by making it a ratio, if I'm right I'll make $250 per vertical without the hedge. I use theta decay is my edge. I'm well versed with the Elliott Wave, adding moving averages and elephant bars (Oliver Velez) on a two minute candle charts.
@@nw6091 That makes sense. I'm learning the 0DTE's Friday I put in a put spread on the early breakout. When I saw the breakout was getting to0 extended to the bollingerbands I actually put a call spread in the simulator for fun. I ended up taking profit in t he second spread before the first but I made my targets on both plays. Yes you have to pick directions but its not a guess. Its technicals and fundamentals and occasionally it will turn on you
@@nw6091 what book?
@@jamesp5301 I was doing a few 0 DTE SPX ICs, 10 wide, and it was going great for awhile. Then, twice, in the middle of the trading day, some Fed guy had to open his mouth with negativity , and the put spreads went WAY against me. I'm phasing out those and will only do them 2 weeks out and take early profits and roll losers early. Learned my lesson. I've rebounded twice but the 0 DTEs just get too stressful.
So, is there any reason to trade 0dte other than pure gambling?
The theta decay adds a big edge if you properly use it for hedging.
For those who know option is not gambling, it is math and discipline.
@@nw6091I'm glad somebody said this. Thank you
Not really
You can put up relatively low amounts if you do a butterfly instead of a credit spread but it’s still extremely reliant and sensitive
I like to trade out if positions way before expiry, more than happy to move strikes and I’m a degen who trades 2 week timeframes pretty regularly with 20% of my capital
Even then I rarely touch 0dte
@@mites7 keeping the longs until exercise cut-off (instead of closing before 0 DTE) could be a source of "cheap" gamma for speculation/lottos, adjusting the portfolio, selling off chunks of theta decay, etc.
0 DTE could include more than just new positions for speculation...
0DTE vertical spreads requires me to be a day trader.
The take away from the trading platform is to take as many trades as possible to maximize their fees
Robinhood does not allow stop limit orders on multi-leg options trades.
35 delta is too close
So whether puts or calls, which strikes do you choose for 0dte if you don't mind me asking
These kinf of strategies do not make sense to me, the win/loss ratio is unaccpeptable 1:3 or even higher.
If you are a directional genius then why take a neutral-ish trade
Is Tony OK here? The incoherent mumbling and disjointed verbal communication made this painful to listen to. Tom, please get your friend some coffee or something.
You title your video "How we trade 0DTE Verticle Spreads" then conclude that you don't trade them often and don't explain any strategy for trading them. Thanks for wasting my time. I've concluded you make all your money from Tastytrade and don't make any as a trader.
Looks like you aren't familiar with the Market Mesures segment. It's all about study and fact based on statistic analysis from their data team. It's not about trading strategy.
@@WhiskyZx3 Fine. Dont give your videos misleading click bait names then. There is no discussion on how to trade 0DTE as the title implies.
But seriously give them a try, tasty trade makes really great content and all for free
@@WhiskyZx3 you may want to consider taking trading advice from people who make money actually trading as opposed to running a brokerage. Skin in the game...
I work with a professional coach as well. Can't complain after 3 years, but I think you're bias a bit for whatever reason against Tasty Trade. I've learn a ton with them, they have so much ressource, but if you stick to the misleading title of that video, I can't help. 😅
u collect 217 and u lose 683 o yeah sound like a great deal to me u zimmie
thats is max loss. you could use SL
@@techfactsglobal2571 You can not! otherwise profitability rate of 62% drops significantly. As a matter of fact you should do the exact opposite to be profitable according to their backtest results.
U zimmi ?
you trade probability, not risk/reward. The bigger probability, the bigger risk/reward. Do you think that the MM is stupid? Which are its odds? The premium. Bigger probability=bigger risk.
@@techfactsglobal2571 You trade probability.
Tom is unbearable I dont know how tony does it.
I'm a directional genius myself, as are 99.99% of losing traders who show off as winners. So 0DTEs is my kinda stuff. Right? How about delta-neutrals on 0DTEs, gauging the next day's candlistick size as an order of magnitude. You with me? An exercize in bayesian probability. And rigorous money management and bet sizing.
I like it.
But "Delta neutral" is almost meaningless when gamma is so high. I'd like to better understand when short gamma is a sensible risk to add (maybe it's only when you want high theta, and it's that simple)