Are you making money from 0DTE trading? Here are 3 risk-defined strategies

Discussion in 'Traders Corner' started by Michael Gonsalves, Oct 28, 2023.

  1. Michael Gonsalves

    Michael Gonsalves Member Staff Member

    Jun 26, 2016
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    Are you making money from 0DTE trading? Everyday expiry on the NSE & BSE is enabling sensible traders with a proper understanding of risk and reward to earn comfortably. Experts have explained three simple strategies with have defined risk & reward

    Seth Freudberg of SMB Capital has released a video titled "The Top 3 0 DTE Options Trading Strategies" in which has explained the basis of 0DTE trading. He states that these have the potential to give a return of up to 70% of the capital deployed in the trade.

    Put Credit Spread/ Call Credit Spread

    Assuming one is bullish about the market, the Put Credit Spread is a good strategy to adopt. If the Index expires above the short Put, one gets to keep the entire premium.

    If one is bearish about the market, the Call Credit Spread requires to be implemented.

    Iron Condor (or Iron Fly)

    The Iron Condor strategy requires to be implemented if the trader is neotral about the market and is neither bullish or bearish. If the Index stays within the range of the short calls and puts, the trader will take home the entire premium received.

    Call (or Put) Calendar

    This is yet another simple strategy where one buys the long-dated option and sells the current option. The concept is that current option will decay rapidly and lose its time value while the long-dated option will not decay as rapidly.

    One viewer cautioned that "This is a good explanation of the basics however don't be fooled. It is much much more important to have a very solid risk management strategy, especially with 0DTE as the market will absolutely move against your positions more often that you can imagine and you will have very little time to react. You must know what to do in case your positions are attacked BEFORE you open them."

    Another pointed out that "Credit spreads are good but you need to get direction right… Good luck with that, the way the market has been moving… I do a zero day iron fly. Let price drop early then buy back the call. Market pushes back up then close out the whole thing. Or in reverse if it goes up first. We have volatility so take advantage of it. If you do a credit spread, make sure you take profits on it before price reverses.. Also keep pattern day trading rules in mind if you are under 25k."