SPX weekly options that expire every Monday, Tuesday, Wednesday, Thursday, and Friday, we trade them on the day it expires. So, there is no overnight risk. Many ask us about 0dte meaning. Usually, we open a credit spread between 9:30-11:00 A.M EST, and we close the trade before the market closes the same day around 4:00 P.M EST. That is why it is called 0-DTE, AKA same-day option trade.
No risk of early assignment and loss of dividends, no portfolio disruption on assignment, and not being assigned SPY shares or a Futures position. 0 dte options, also known as Zero Days to Expiration, are our focus for option strategy trading. Selling and buying options at zero days to expiration, particularly through our SPX 0-DTE strategy, present attractive trading opportunities.
Most Stocks, ETFs, indexes, and futures contracts have options, and all options contracts have an expiration. The premium, or price/value of an option, decays exponentially over time until it is completely gone at the time of expiration. At 0 DTE Options & Futures, we engage in option strategy trading, particularly on the last day of expiration, to collect or profit from this rapidly decaying premium. Often, these options expire worthless, allowing us to retain 100% of the premium received.
Once the 0dte meaning is clear to you and you proceed to options, they may seem complex in nature at first but are not complicated once you have a general understanding. The principal reason we trade them is that they let us define our risk and potential profit. The other reason we trade 0 dte options is the incredible versatility these strategies have in varying market conditions or news-driven events.
The last day of expiration is a special case that presents a significant edge, allowing us to take a small risk while spending a very short time in the market. While you could trade 0 dte options with any asset type, we choose options on the SPX for some very specific reasons that give us an incredible edge, as noted above.
Trading on the last day of expiration allows us to take advantage of the exponential decay of premiums. As time moves forward toward the expiration of the options contract, our ability to take in premium/profit increases dramatically, giving us that edge. Option for trading on the last day of expiration is a key aspect of our approach, enabling us to maximize returns. Options on SPX have five expirations every day of the week: Monday-Friday. That’s 5 opportunities every week to take advantage of this edge. Most stock options only have one opportunity per week, and some only once per month. Contact us if you want to master trading and need our thorough assistance.
We specialize in optimizing option strategy trading, particularly focusing on options for trading. Our approach involves employing multi-leg premium collection strategies, which comprise two or more options contracts. Within these strategies, some contracts are sold (short) while others are held long to mitigate risk effectively.
Among the various option strategies utilized, vertical spreads, short straddles/strangles, iron condors, and butterflies are the most prominent. The choice of strategy depends on individual risk tolerance and prevailing market conditions. Our selection process for specific strategies and strike prices relies on thorough analysis, incorporating both technical and discretionary factors.
One of our preferred methods involves selling low delta 5 wide vertical spreads with a 3x stop, allowing the trade to unfold until either being stopped out or the spread expires worthless. Another popular approach is the Iron Condor strategy, wherein two spreads are sold simultaneously, each with the same 3x stop.
Have questions regarding trading? Reach out to us with your questions and queries
A credit spread where we sell an option at one strike and simultaneously buy an option at another, creating a net credit received. One way we use this is to use a 5 pt spread between the 2 strike prices. So if we are selling a 4000 call we are purchasing a 4005 call at the same time. (So if we are selling a 4000 put we are purchasing a 3995 put at the same time.) The difference in prices between these two options provides a net credit to your account. If the market goes up or down a little, or trades sideways the whole day you keep 100% of the credit received.
Stop limit is usually a hard stop at 3 times the credit received, so losses will be twice the credit received. If you receive .50 credit for the spread ($50), your max risk will be $100 for the trade. And the max profit would be $50 if it expires worthless. Sometimes we will take profit at 30-50% if the market conditions change, but will always strive for 100% of the credit received.
Market internals give an overall snapshot of the market and its strengths or weaknesses.
TICK The number of stocks that traded at a higher price compared to their previous trade, minus the number of stocks that traded at a lower price compared to their previous trade. For example, if TICK reads +500, then there are 500 more stocks trading higher compared with stocks trading lower. The opposite is true if it is -500.
TRIN This is the Trading Index. This calculation is the number of stocks that are up compared to the previous trading day's close, divided by the number of stocks that are down compared to the previous trading day's close. This ratio is then divided by the volume of stocks that are up compared to the previous trading day close and divided by the volume of stocks that are down compared to the previous trading day close. Formula:
TRIN = (ADV / DECL) / (UVOL / DVOL) NVOL is the difference between UVOL and DVOL. UVOL The total volume of the stocks for the particular exchange or index the symbol is for that have traded in the current trading day and are up in price compared to their previous trading day close.
The total volume of the stocks for the particular exchange or index the symbol is for that have traded in the current trading day and are down in price compared to their previous trading day close.
The number of stocks that have traded during the current trading day and are up in price compared to their previous trading day close. Each stock only counts a value of one towards the statistic.
The number of stocks that have traded during the current trading day and are down in price compared to their previous trading day close. Each stock only counts a value of one towards the statistic.
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Opened my eyes to many things. Never knew market internals helped so much. The S/R is so on point! Opened my eyes to many things. Never knew market internals helped so much. The S/R is so on point!
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