oday’s video we are going to go over 0-DTE SPX Options. This seems to be a pretty hot topic these days. Many people think that there is a silver bullet and trading 0-DTE SPX is going to make them rich.
Well I’m here to tell you, hold on to your horses. There is no silver bullet. However, there is a way that we can use them to our advantage to balance out our portfolios while making some quick profits as well!
I’m Darren and ooh am I excited about this video. Many of you have asked me “What is the best way to trade 0 DTE options?”.
Say no more. We are going to cover that in this video.
We will discuss:
- Why trade SPX?
- What is the best strategy for trading 0 DTE SPX?
- How do we place a Zero DTE SPX option trade? (Showing a real example on the option trading platform)
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For me it’s super important that we are using the safest ways to trade options while putting ourselves in the position to grow our accounts as quickly as possible and multiply profits.
So if you are ready, go ahead and hit that like button and, if you haven’t already, be sure to download the FREE options Workshop in the link below.
It talks about the two main benefits of trading options over buying stocks.
DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
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Why trade SPX?
There are several reasons that SPX can be considered a good trading vehicle for shorter term options.
Liquidity
First, it is extremely liquid. In other words you don’t give up a lot in the difference between the bid-ask spreads. This is because a lot of people trade it so it is a high volume index.
At the making of this video the SPX is in the 4300 range and the bid-ask spreads are 10 cents wide so that is pretty fair.
Cash Settled
SPX is cash settled. What does cash-settled mean? A cash-settled option is a type of option for which actual physical delivery of the underlying asset is not required. Instead the settlement results in a cash payment.
Tax Advantaged
Now I am not providing tax advice so talk with your CPA for that. However, it is my understanding that SPX options are taxed at the lower long term capital gains rate which is an advantage for you at the end of the year when Uncle Sam comes knocking.
These are 3 great reasons to use SPX if you are looking at trading zero DTE options.
What is the best strategy for trading 0 DTE SPX?
There are different thoughts on this and I’m sure there are multiple strategies that can be profitable. So I’m going to share what I am doing. Please share in the comments below and let us know what you may be doing that is working or not working for you.
If you have watched a lot of my other videos, you probably have noticed that I generally like to sell options rather than buy them. This is because as an option seller we have a much higher probability of winning versus buying options.
Really the only time I like to buy options is when I am buying LEAPS 1-2 years out so I don’t get eaten up by the time value ticking away.
So with 0 DTE SPX options, why would I do any different? Time value is moving much faster so that is why I sell credit spreads ATM At the Money.
If I can make a quick profit, then I take it and look to rinse and repeat.
If the SPX price moves against me, then I close and roll out and look to collect additional premium by widening my strikes.
I like to do this as a hedge against the rest of my portfolio as a way to keep my delta’s fairly neutral and in line.
The market is not going to move straight up and it wont move straight down. It always moves in increments up and down. I do like to have trades on both sides and SPX is basically my short side most of the time.
So that is the general concept of the way that I like to trade SPX.
How do we place a Zero DTE SPX option trade? (Showing a real example on the option trading platform)
Open up your Tastytrade account or whatever broker platform you are using. Tastytrade is one of the best and most intuitive for trading options. Please use my link below and right now you can get cash back when you open an account depending upon how much you fund your account with. I recommend at least a couple thousand so that you can place several trades.
Now if we punch in SPX in the upper left and go to the trade page we can see the daily option chains. Notice the W for Weekly’s which trade from 8:30am to 3:15pm Central Time (Chicago Time).
Now take a look at the July 21st chain and the AM next to it. I stay away from these.
This is the monthly SPX options and they stop trading on the Thursday prior to the 3rd Friday of every month. So they actually stop trading when the market opens on Friday morning and you are stuck and cannot trade them.
I found this out the hard way.
So let’s open up the 0DTE SPX chain.
SPX is trading at 4367 so I am going to go right ATM at the money and sell the 4365 4370 Call Credit spread. We click the bid to sell the 4365 and ask to buy the 4370 options. And we collect $250 upon placing the trade and the width of the spread is $5 so the max we can lose is the $5 – 2.50 or $250 as well.
So it is basically a coin flip. We can make $250 or lose $250.
We switch to the curve mode and see that we make the $250 as long as SPX stays below the 4365 short strike price by the end of the day.
So if this trade goes against me, meaning the SPX went up above the 4365 short strike, I will just roll out in time and collect additional premium.
I know that eventually the market will have a down day and I will make the money back and collect more premium.
Here you can see where on June 15 I placed the $5 wide Call Credit Spread and collected $250.
The SPX stock price moved up and went against me. So I rolled to the next day, June 16, and doubled the width to a $10 spread and collected another $115. So now I had $365 collected on a $10 spread so I had $635 in risk that I could lose.
Now the market could keep going up against me and I continue to lose.
Which of course it did!
However, since I am still delta positive overall in my portfolio, I will still make money as the market moves up.
So when it moved up I closed out of the 0 DTE. However, this time had to roll further out in time and also to $15 wide to still collect premium. We are now at the $4405-4420 Call Spread. I only collected $50. So I am now $685 collected on a $15 wide spread. So it is 1500-685 = $815 at risk.
You can see how you could get in trouble if the market just kept heading to the moon!
Now as you can see SPX has now finally moved down below my short Call Strike. There are 7 days left in the trade. I could close now and take the winner.
However, that will leave me pretty long delta in my portfolio. I actually need -86 short delta’s to protect against a further drop in the market. I’m actually 60 positive delta’s long overall in the portfolio even with this -86 deltas, so this is about where I want to be since over time the market moves up on average about 10% per year.
If we look at a longer term chart, I think we still may be a little over priced. PE’s are near 20 so they are high when they should be closer to around 15 and the historical averages.
So this is another reason I like to use a ATM Call spread in SPX as opposed to an ATM Put Spread. And I need the negative Beta weighted deltas to oppose my long delta stocks that I really like right now in my portfolio.
Alright guys, 6 DTE and the market is down this morning. I am taking off the risk and banking the profit.
You can see here I closed out for $240 debit. You can also see where we made $650 in the past 60 days. So this strategy is working for me right now since I have been implementing it.
Now, I will look to put on the 0 DTE SPX Call Credit spread again but just $5 wide. Preferably on an up day next week. So I’ll get back to risking just the $250 to make a quick $250. If it goes against me, then I roll, collect a credit and rinse and repeat.
Key Takeaways:
Still selling premium versus buying so math and time decay is in our favor
Even out our Deltas – Bank winners and roll out losers
SPX is liquid, cash settled, and tax friendly
Can take a quick profit if there and if not roll for credit and profit later
Alright guys, if you are a beginner and this sounded confusing do not worry. It did for me as well originally. We will be continuing to cover the details in future videos. We will continue to learn and succeed together.
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I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to hit like and subscribe and leave a comment below with your thoughts on the video and what you would like to see going forward. Also, please ask any questions that you have and I will answer them.