0DTE & 1DTE Trading: Ultimate Guide & Secret Trading Tips

0DTE & 1DTE Trading: Ultimate Guide & Secret Trading Tips

Unveiling the Power of 1 DTE and 0 DTE Options Trading: A Strategic Approach by David Jaffee

Are you ready to explore a dynamic options trading strategy that could potentially unlock substantial profits while mitigating risk?

In this article, I'll delve into the world of 0 DTE (Days to Expiration) options trading, where I, David Jaffee, harness the power of OTM (Out of the Money) strangles on SPX (S&P 500 Index) options to collect premium, while implementing a well-defined stop loss strategy. 

For more in-depth information about my trading strategies, you can enroll in my comprehensive option trading education course.

Since August 2023, I've only had 3 losing trades when trading 1 DTE (all on the call side).

Exploring the Concept of 0DTE (and 1DTE) Options Trading

0DTE options trading is an exciting strategy that involves the trading of options contracts with zero days left until their expiration (although I primarily trade 1DTE).

I have incorporated this trading strategy into my overall option trading strategy.

By focusing on SPX options, which are European-style index options, I'm able to realize a 1256 beneficial tax treatment while also taking advantage of daily expirations.

OTM Strangles and Premium Collection

The cornerstone of my 1DTE and 0 DTE options trading strategy lies in the implementation of OTM strangles on SPX (you can also use SPY). 

An OTM strangle involves simultaneously selling an out-of-the-money put option and an out-of-the-money call option with the same expiration date but different strike prices.

I tend to sell strangles that are far OTM and then, as volatility expands, I go even farther OTM.

During periods of high volatility and volatility expansion (such as August 2024), it's possible to realize significant profits from 0 DTE and 1 DTE trading.

When VIX increases traders will also receive a lot more premium when selling options and you can sell strikes that are further OTM. 

Risk Management through Stop Loss

While 0 DTE options trading can be highly profitable, it is crucial to manage risks effectively.

I use a 4x stop loss on the total premium collected when trading this strategy.

Meaning if I collect $1 in total premium, then I'll close out the position once it hits $4. 

By setting predetermined exit points, I ensure that my potential losses are limited, thus safeguarding my trading capital in case the market moves against me. 

This disciplined approach adds an extra layer of security to my overall strategy.

Applying Zero and 1 DTE to Your Trading

During grind down markets, zero and 1 DTE option trading can help you realize substantial profits while also limiting risk.

When trading 0 and 1 DTE, it's very important to negotiate commissions with your brokerage.

With E*Trade, I pay less than $0.60 (in total) commissions for each SPX contract that I sell (10 cents commission per contract plus exchange fees).

However, many others pay ~$3+ per contract.

Unlocking the Full Potential with BestStockStrategy.com

To truly grasp the intricacies and nuances of my 0 DTE options trading strategy, it is recommended to explore my comprehensive option trading education course. 

At BestStockStrategy.com/memberships/, I reveal my full arsenal of techniques and provide valuable insights for traders of all experience levels to improve their options trading performance. 

From understanding option pricing and volatility to crafting robust trading plans, my course equips traders with the knowledge and confidence necessary to navigate the markets successfully.

Conclusion: 0DTE Option Trading

My approach to 0 DTE options trading has helped enhance my returns.

By selling 0DTE and 1DTE OTM strangles on SPX options and implementing a stop loss strategy, I balance the premium collection with risk management.

By enrolling as a member, you'll be equipped with the tools and strategies to navigate the options market with confidence.

Frequently Asked Questions (FAQs) - 

0DTE & 1DTE Option Trading Strategy

Is 0DTE a good options trading strategy?

0DTE can be one component of a profitable options trading strategy.

It's good to utilize 1 DTE and 0DTE as part of a larger strategy.

What type of returns will I realize from 0DTE trading?

0DTE can add an incremental 10% - 15% per year.

Is 0DTE better than 1DTE?

No, personally, I prefer 1DTE, but 0DTE is fine as well.

Minimize risk while trading 0DTE?

The best way to minimize risk is to trade vertical credit spreads (defined risk trades), while also utilizing a stop loss.

More Information on 0 DTE?

A few good articles that I've found on 0DTE are here and here.

About the Author David Jaffee

I (David Jaffee) help people become consistently profitable traders while minimizing risk. Learn more about our live trade alerts and courses. I graduated from an Ivy League University and worked at some of Wall Street's most successful investment banks. Subscribe to my YouTube channel for valuable videos - BestStockStrategy YouTube Channel​. My personal website is DavidJaffee.com.

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