The Zero Trend in Options Trading (2024)

49%

of SPX® volume traded 0DTE

58%

annual increase in SPX® 0DTE volume since 2016

32%

of XSP® volume traded 0DTE

Outcomes Known Quickly:
0DTE allows users to take very short-term positions and hedges on the market. The outcome of the trade is known the same day, and less capital is needed than equivalent strikes with further dated expiries.

Liquidity & Lower Premiums:
0TE options tend to be highly liquid with higher trading volumes and very tight bid-ask spreads. With potential lower premiums, they can be less expensive to trade short-term volatility. But short-term options, particularly 0DTE options, can come with risks due to potential intraday volatility and limited time to expiration.

Trading Tactically:
With 0DTE options available every trading day, you have more flexibility in your trading strategy – take advantage of short-term price movements, react quickly to news events and adjust your position based on market conditions.

Selling Call or Put Spreads

Overview:
You may sell a call or put spread based on your directional view of the market. A call or put spread means taking on some limited amount of market risk (the strike width) in exchange for the premium collected at trade entry.

Unlike iron condors, these are directional trades – if you think the market won’t go down then you could sell a put spread, and if you think the market won’t go up you could sell a call spread.

Call Spread

Example:
Sell 1 call short
Buy 1 call at any prices beyond the short call

Profit & Loss:
The trade would become profitable if SPX moves down or stay the same, or moves below the price of the short strike. Maximum profit for a call spread is the premium received. The trade would become unprofitable if SPX moves beyond the difference or width of the strikes. Maximum loss is the width of the strikes minus the premium received.

Keep in mind:
The goal is to limit the potential max loss on the position. If the underlying asset rises slightly, the position may have a gain, depending on how far out-of-the-money (OTM) the credit spread is. If the underlying asset doesn’t move at all, the position will make money.

Put Spread

Example:
Sell 1 put short​
Buy 1 put any ay price further out-of-the money (OTM) from the short put

Profit & Loss:
The trade would become profitable if SPX rallies and the put spread decreases in value. The trade would become unprofitable if SPX falls, resulting in the put spread increasing in value. Maximum profit for the put spread is the premium received. Maximum loss is the width of the strikes minus the premium received.

Keep in mind:
A put spread that is initiated OTM has an increased probability of expiring worthless. Because of this, the potential profit is always less than the potential loss for OTM credit spreads.