What Are Options?
An option is a contract that gives you the right (but not the obligation) to buy or sell a stock at a specific price before a specific date. Think of it like a reservation — you're paying a small fee now to lock in a price for later.
There are two types of options:
- Call options give you the right to buy a stock at a set price. You buy calls when you think the price will go up.
- Put options give you the right to sell a stock at a set price. You buy puts when you think the price will go down.
Key terms you'll encounter:
- Strike price — The price at which you can buy or sell the stock
- Premium — The cost of the option contract (what you pay to enter the trade)
- Expiration — The date when the option expires and becomes worthless if not exercised
- In-the-money (ITM) — A call is ITM when the stock price is above the strike; a put is ITM when below
- Out-of-the-money (OTM) — The opposite of ITM; the option has no "intrinsic value" yet
- At-the-money (ATM) — The strike price is very close to the current stock price
What Does 0DTE Mean?
0DTE stands for Zero Days to Expiration. These are options that expire on the same day you trade them. When you buy a 0DTE option in the morning, it will be worthless by the market close that same day unless it's profitable.
This might sound risky — and it can be — but 0DTE options have become enormously popular because:
- They're cheaper than longer-dated options (less time value to pay for)
- They offer high leverage — small stock moves create large percentage gains
- No overnight risk — you're never exposed to after-hours surprises
- Major indices like SPY and QQQ now have daily expirations, making 0DTE accessible every trading day
Why 0DTE Behaves Differently
0DTE options are not just "short-dated options." They behave fundamentally differently because of how the "Greeks" (the factors that influence option prices) change near expiration:
Gamma Is Extremely High
Small price moves create large changes in the option's sensitivity (delta). This means profits and losses happen very fast.
Theta Decay Is Extreme
Time value collapses rapidly throughout the day. If you buy an option and the stock doesn't move, you lose money quickly.
Vega Exposure Collapses
Volatility changes matter less compared to longer-dated options. Price movement is what drives the trade.
Liquidity Is Critical
Wide bid-ask spreads can eat your profits. Stick to the most liquid symbols like SPY, QQQ, and IWM.
Because of these factors, trade management and strategy selection matter more than theoretical payoff alone. The "best" strategy on paper can fail if execution is poor.
Defined Risk Strategies
These strategies have a known maximum loss, making them the most popular choice for 0DTE traders. You always know your worst-case scenario before entering the trade.
Long Call
DEFINED RISKBuy a call option when you expect the stock to go up. This is the simplest bullish strategy.
0DTE tip: Take profits quickly on impulse moves. Avoid holding through midday stagnation.
Long Put
DEFINED RISKBuy a put option when you expect the stock to go down. This is the simplest bearish strategy.
0DTE tip: Scale out into flush moves. Avoid overstaying after volatility spikes.
Bull Call Spread (Call Debit Spread)
DEFINED RISKBuy a lower-strike call and sell a higher-strike call. You pay a net debit (the cost difference). Your profit is capped at the width of the strikes minus your cost.
0DTE tip: Close near max value if achieved. Avoid holding near expiration pin risk.
Bear Put Spread (Put Debit Spread)
DEFINED RISKThe bearish version of the bull call spread. Buy a higher-strike put and sell a lower-strike put.
0DTE tip: Enter early in session. Tight spreads in liquid strikes reduce cost.
Iron Condor
DEFINED RISKSell an OTM call spread and an OTM put spread simultaneously. You collect a credit and profit if the stock stays within a range. Your risk is capped by the wings.
0DTE tip: Take 50-70% of max credit early. Cut if price approaches your short strikes. Avoid entering before major news.
Iron Butterfly
DEFINED RISKLike an iron condor but the short strikes are both at-the-money. Higher credit but narrower profit zone. You're betting the stock doesn't move much at all.
0DTE tip: Profit quickly if underlying stays pinned. Exit immediately if price starts trending.
Broken Wing Butterfly
DEFINED RISKAn asymmetric butterfly where one wing is wider than the other. This creates a slight directional bias while keeping risk limited. Can be entered for a small credit or small debit.
0DTE tip: Works best when you expect a moderate move in one direction with limited risk.
Undefined Risk Strategies
These strategies have theoretically unlimited loss potential. They require extreme discipline and should only be used by experienced traders who understand the risks. In 0DTE, gamma acceleration makes these particularly dangerous.
Warning: Undefined risk strategies can result in losses significantly exceeding your initial credit received. These are presented for educational purposes only.
Short Naked Call
UNDEFINED RISKSell a call option without owning the stock. You collect premium and profit if the stock stays below your strike. But if the stock rockets higher, losses are unlimited.
Short Naked Put
UNDEFINED RISKSell a put option. You profit if the stock stays above your strike. Losses are substantial if the stock crashes.
Short Straddle
UNDEFINED RISKSell both an ATM call and an ATM put at the same strike. You collect maximum premium but are exposed to unlimited risk in both directions. You're betting the stock pins at the current price.
Short Strangle
UNDEFINED RISKSell an OTM call and an OTM put. Wider profit zone than a straddle but less premium collected. Still carries unlimited risk on breakout.
Volatility Expansion Plays
These strategies profit when the stock makes a big move in either direction. You don't need to predict which way — just that it will move significantly.
Long Straddle
VOLATILITYBuy both an ATM call and an ATM put at the same strike. You profit on a big move in either direction. The trade-off: you need a move large enough to overcome paying for both options.
0DTE tip: Sell into the first strong impulse. Time decay is brutal if the expected move stalls.
Long Strangle
VOLATILITYBuy an OTM call and an OTM put. Cheaper than a straddle but requires a larger move to profit.
Scalping Strategies
Scalping strategies in 0DTE are execution-driven rather than expiration-driven. You're looking for quick profits from small moves, not holding to expiration.
Deep ITM Scalping
SCALPINGBuy deep in-the-money options with high delta (0.70-0.90). These move almost dollar-for-dollar with the stock, giving you synthetic stock exposure with leverage and limited downside.
ATM Gamma Scalping
SCALPINGBuy at-the-money options where gamma is highest. These options are extremely sensitive to price changes, allowing for rapid profits on quick moves. Requires fast execution and tight stop losses.
Key 0DTE Execution Principles
Regardless of which strategy you choose, these principles apply to all 0DTE trading:
Liquidity Over Complexity
The fanciest strategy is useless if you can't get filled at a fair price. Stick to SPY, QQQ, IWM, and other high-volume tickers.
Spread Width Matters
Wide bid-ask spreads eat your edge. A tight spread (under 5%) is more important than theoretical profit.
Gamma Accelerates After 1-2 PM ET
As expiration approaches, gamma spikes dramatically. Defined risk strategies become more important later in the day.
Avoid the Final 30 Minutes
Unless you're in a defined-risk strategy, close positions before the final 30 minutes. Pin risk and settlement issues can create unexpected outcomes.
Take Profits Early
In 0DTE, a 50% profit taken early is often better than waiting for max profit. Time decay works against buyers and momentum can reverse quickly.
Size Your Positions
Never risk more than 1-2% of your account on a single 0DTE trade. The speed of these moves means you need room for the occasional loss.
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