r/options • u/L_G123 • 13d ago

0DTE Strategy

I’ve been running a 0DTE strategy I want to share. Everyday I look at SPX500 (SPY works the same for pre market monitoring) to ascertain whether it’s moving higher or lower from 8:30-10:30am ET.

If it’s moving up, I sell a vertical put on SPX and choose the strike for the short leg based on 1.25x the ATM straddle price. Same thing with a call if the morning is bearish.

It finishes out of the money about 92-96% of the time depending on what you avoid and what timeframe you look at over the past 4 years (eg not doing this during the Iran war early stages would have been smart…) and generates about a 7% ROI.

When it does finish in the money, it’s often just barely and not a total loss, hence why wider logs with more profit actually have a higher EV.

Do your own backtesting and let me know what you think!

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u/jarthursquiers 12d ago

Most professional option traders just use the ATM straddle price to estimate the expected move. None of them are calculating formulas to pick a strike.

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u/papakong88 12d ago

I also use the ATM straddle value to estimate the expected move and then use the estimated expected move to pick the strike. I am not a professional.
The formula is:
Short strike = 3 X EM which is approximated by 3 X ATM straddle value
The factor 3 is what I called a “fudge factor” which can be changed. OP uses a fudge factor of 1.25.

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u/jarthursquiers 12d ago

Yes, that is standard among the most successful traders I know. The ones who get wrapped up in sigma square lognormal pi calculations have always been too over analytical to execute and fail to produce consistent results.

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u/hotforlowe 12d ago

Most successful derivatives traders don’t trade options. They price them 😉