Stop Selling 0DTE Options on SPX!!

Explaining the concept of selling 0DTE options and why it's a terrible strategy.

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#Investing #DayTrading #Options #Stocks
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🛑Risk Disclosure: The material in this video is presented solely for informational purposes, and is not to be construed as solicitation or an offer to buy or sell any securities or any related financial instruments, nor should any of its content be taken as investment advice. TexTrading accepts no liability whatsoever for any loss or damage of any kind arising out of all or any part of this material. We recommend you consult with a licensed and qualified professional before making any investment decision.

[martymcyourflysdown]

I like buying 0dte spx options. The key for me has simply been to get out fast. I’ve found that even on green days the SPX almost always crashes within the first 10 minutes of market open. So I typically get 0dte puts at 9:30ish and sell by 9:40 and make an easy 20-50%. I’ve been able to get my account up 1, 200% in 2022 by doing that and out of all my trades (over 100) I’ve only had 2 go bad from the jump. And when they go bad I get a call essentially turning it into a straddle and get close to a breakeven or even come out on top still.

The ONLY time I had this go really bad was the one time I got emotional and held my put all day hoping for a reversal which never happened. So if anyone reading this wants to buy one, Don’t get emotional or hold them all day, Also don’t even bother after noon unless you really know what you’re doing because Theta will destroy you at the end of the day. Lol

Just figured I’d share that tho because it’s been working good for me. I’ve never sold options because I have little understanding of the short side but I’d like to learn more about it.

Also one more thing I’d like to mention is I don’t buy far ITM or far OTM. I almost always get 0dte Puts OTM as close to the current price as possible. And when the FED raises rates it will crash again so it’s an easy opportunity to make money on the puts.

[_dser]

Your "alternative" is only working here because you're looking at a day already completed. It's easy to fit a strategy when you can see the outcome ahead of time.

[przemekkrysinski]

Great Video....but for others reading the comments....don't sell PCS (put credit spread) right at the open. You are locking in into "unknown". Wait 45 minutes for a market to develop its range, and combined with other resist/support areas, then you can make a move. Unless....it's a full blown selling/ripping day, and you can adjust for that.

[davek]

If your credit spread starts to move against you, you also have the option to break legs or unravel by buying back your short options. If the spread keeps moving you can make a large profit.

[stockspecter]

Appreciate your video. But, my personal preference is selling options - I'll take gamma risk over theta decay anytime! I think blindly entering a PCS at open is a terrible strategy, so I do not recommend doing that. I usually wait until a level is confirmed, sell the PCS options, and set a stop loss. My max loss is now defined, and the odds are 85%+ in my favor. Just my two cents.

[randallewebb]

Good video on Gamma, but I have to disagree.

I think you have partially covered how these are setup.

1) Max loss - It is recommended to put a Bracket order on the short side for 3x initial credit for 2x max loss. So you would be losing roughly $220 on the trade

2) Hedge with other side of Iron Condor: If you did the Call side for near the same credit, then your overall loss is even less $220 - $95 = $125.

So the real loss for doing an IC is about $150 - $170 (just adding to make the math easier). The risk to reward is VERY MANAGBLE within 2:1.

3) Probability: Many recommend between a Delta of .05 - .10. So you are looking at 90-95% probability. If you do an IC it goes down to about 81 - 90%. Those are really great odds. The key is to manage losses.

Also, while what you said is true about Gamma being FOR you, Theta is DEFINITELY against you. So there are definite trade offs.

Just my 2 but I still appreciate the video.

[WestCoastTruckingCEO]

At the end of the day it really doesn't matter if you sell or buy options... in either scenario you have to be correct on the direction of the price. 0DTE is just more risk more reward so if your risk tolerance is high then 0DTE is what you want. You can double your portfolio in 30 min or you can lose it all. All comes down to what you're comfortable with. Delta/gamma/vega etc isn't what you should focus on, being correct on the direction is

[brianr]

This whole video is making the case based on the worst case, most reckless trader imaginable. Buying at market open without establishing a direction. Letting the contract go to max loss. No one does that stuff. And who would sell a put spread based on the example in this video? No one. SPX is tanking from open. This would be a day just to sit out from the Credit spread. Hyper volatile days like this are 100% better harnessed with buying single options. This video still earned the subscribe.

[kloakedspirit]

Gamma risk is real on 0 DTE, and the example of having to buy out at a credit spread at a larger loss than anticipated because of a sudden early plunge toward ATM is a fantastic example of Gamma risk. However, the example with the 4600C isn't. Gamma decreases as we move further away from ATM, so an already ITM call that continues to go deeper ITM would be seeing a decrease in Gamma impact the entire time of the example. The jump up in that example would have mostly been Delta driven.

[alandpt]

You make the point of the worst case scenario on one hand and the best case on the other completely biased opinion and left out the fact if risk management is not practiced both cases can lose total investment capital.

[justinkredible]

the issue you identified is opening the trade at open. I think its important to focus on market direction and key levels that will keep your trade expiring worthless Usually you can find this within the first two hours of market open.

[nevinyoung]

Being obsessed with risk to reward without considering POP is a common flaw in people's logic. If you are going to do these trades every day, being careful not to enter them on the wrong days (news days, earnings, etc) then statistically, you will make money. But you will have to grit your teeth once in a while and take a big loss about 1 time in 10. And about 50% of the time, you can roll out of trouble.

[edentucker]

First of all, your supposed to wait until after 10am before making options investment. The first hour of options taking is the most volatile. The most I've been able to make on SPX is $40 because I refuse to play smaller spreads. It's a $400 loss if you're wrong. I wait until noon and also you have to be careful because this stock is notorious for jumping 30-50 points. You have to plan for that.

[erichesse]

I think others have mentioned, always use a stop with these, 3x credit is good rule of thumb, and I stick with 5 delta, and I keep supply and demand zones in mind as I place these about 30 min after open. These cans be managed throughout the day as well if the market has big swings. It is a helpful video though bc I bet a lot of ppl don't understand how important stops and stike selection are on these.

[papoosee]

Thanks Tex. Good video, and that massive downside risk is something that I’ve always struggled to reconcile with on 0DTE, SPX credit spreads as well. I would say that there’s a time and place for everything. Credit spreads worked great last year because the intraday vol was very low and everything decayed within a few hours, meaning buying options would’ve lost you money.. maybe not in dramatic fashion that credit spreads can make you lose money, but it’s more of a “death by thousand cuts.” I’ve lost 100% of my gains from last year and then some this past three weeks doing 0DTE credit spreads because in this environment I should’ve been buying options. Vol is crazy high and the risk is very real with 100 pt intraday moves being the norm. So right now is a great time to buy. But when things slow down again, sell those 0DTE credit spreads.

[mydaytrade]

If u r option seller u can make profit even if ur 60% skilled in trading. If ur option buyer u should be 600% skilled in trading. That’s the difference between option selling and buying.

[jjtrades]

When I do this. I wait to see what way the market is moving, how much strength its moving with, which side is the most overleveraged, if there are any Fed meetings or other potential important catalysts etc., and wait for the market to either appear to top out/bottom out, and wait to see signs of a reversal, THEN open the trade with a trailing stop of 1%

[Manishahd]

Anyone just opening a put credit spread without considering price action is looking for trouble.. credit spreads are directional trades ..

[rgasta]

I strongly disagree with this. I have a 86% success with 0DTE using 2X stop loss right after I enter my spread and 30min timeframe. I doubt you can match that with a naked call/puts on a 5amin chart. My guess is actually you gonna have multiple stop losses in the same day, exhausting your max 3 daytrades limit(if under 25K)

[Sage.highstrike]

I also strongly disagree with all this. First off, use a stoploss. When you buy options, the same rules applies, why wouldn't you use a stoploss selling options at 0dte. And gamma risk is a factor no doubt, so is theta when you buy options 0dte. And we didn't reference the charts at all in this video on the macro level. This strategy works. now expecting it to work everyday is a different story