How To Pick A 0 DTE Options Strategy | Zero Days to Expiration Options
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You guys are the best in the finance business. No one puts out information like this, except Tastytrade. Thank you. Best broker in the universe!
They didn't lose half their value in the last third of the day. They lost ALL of their value in the remaining 2:10. The surprising thing is that they HELD half of their value at 4:20 into the day.
What is actually more value, selling and closing positions in the first third of the day when the price is actually higher, or getting that last 50% of a smaller number in the last third of the day?
Tony brought this up and my intuition says the first third of the day would be better to just get in and take a quick 20% profit.
I say the same, ok percentages but what's the underlying number?... It's the same discussion about time decay in long terms expire: most of them say "in the last 30 days options lose the highest percentage of their value!". Ok sure, and the last day they lose 100% of 1 dollar :D... I would prefer selling a 180dte and closing it in 30-60 days.
My interpretation is totally different than how you guys are presenting the data - you suggested "tranches" in the context that they were being OPENED at different times. My interpretation is that the straddle is put on at the beginning of the day, and the theta decay of the (opening bell) straddle loses 30% by 10:40, another 20% by 12:50, and the final 50% by EOD. Care to comment?
Yeah it was from opening, is my understanding.
Yes, theta decay is accelerated the last two hours of the day.
I think you interpreted the data correctly.
Same interpretation. Also the sum of all percentages equals to 100%. Theta must go down to 0 by the end of the day.
I agree
Almost there boys. Please do a study on actual P/L for selling 0dte strangles and straddles
I've figured this out on my own during the last year but I'm happy to see you guys confirm it.
What did you figure out
It would be interesting to compare 0 DTE option decay sold on the day of expiration vs the same option decay sold at the close of the previous business day. How much decay happens overnight on the following day's 0 DTE option?
It’s a good bit but you have overnight risk so if it opens against you it will be little or none and if it’s otm the iv will also likely go up also going against you (not to say this type of selling can’t work I sometimes run these)
@@GarronDaBoss Would love to see the added risk on these vs the payoff. e.g. is the payoff worth it, on for example on selling 20 delta short calls vs 20 delta short puts. ( would think melt ups/short squeeze plays with short calls are less risky then panic selling on the short put side) - on day of vs night before business day vs friday across weekend vs day before long holiday (3 day) weekend. Also would like to see if any difference on options on futures where where can trade and manage @ 6 pm weekdays to next business day or over weekend when can start managing pos'n on Sunday evening...
Those SpX options are terrifying lol.
When you re wrong w em its
no mercy.☠️
Anyone know how this would figure for 0 DTE butterflies?
Definitely makes sense to consider the trading day in 3 parts/phases, though I would say the middle part (mid day lull) is larger than the other two.
also if there is rules for halt if it is bigger than 20 are we not allowed to put in a trade if we think it is bigger will it halt it and hurt it do we have to get it in smaller parts in several trades instead of one only ? How does it affect it ? Why did they make 20 and 10 rules anyways ?
I've been watching time decay on my 0 dtes for a few months. I find most decay happens in the last 1 - 1.5 hour.
I've found that putting on put ratio spreads with the long put atm, starting one hour after the open, then adding more ratios if the price drops below my short puts, results in the best scenario.
Do you do Iron condors or just put credit spreads?
Would be nice to SEE some examples
How long should i hold my position before time to starts eating my profit away if i buy at opening bell , should I exit in less than 10 min???
I wouldn't hold any 0DTE for longer than hour. They're best for scalping. If you can't get from entry to exit within an hour, then you just need to cut the trade and admit you got bad entry... but honestly if your entry was really that bad, you'll be stopped out way before that hour ends.
But the premiums for 0DTE are smaller compared to LEAPS.
Time is money.
What is a large Expected Move? Which IVR should we consider? 30+?
I really treasure your videos, thank you, guys. I think you made a mistake in this one when you said that "it is 50% loss of a smaller value". I think the point is, and please correct me if I am wrong, that those percentages are applied to the value of the option at the beginning of the day, Aren't they?
I’ve been waiting for this
So, i absolutely dont mean to disparage by asking this, purely curiosity: was GPT or a similar LLM involved in the slide production? I detected some AILLM type speech patterns, tbh im just trying to tune my own botdar
Can you make a video about all the deltas how they compare for all the different ones on one day which go faster or not ? if atm vs otm does it matter to it does it go quicker if they are certain size?
Can't read the grey colours . I like that you are explaining the day options instead of 21 day ones.
What about for ic and IF ? Say 25 W ic or a typical 16 delta ic and say a low 05-06 delta and an iron fly say 70 ish wide or some other width based on expected move. Part B ( or C?) of my question is have you looked at gex / Gamma exposure and strikes with large amounts of gamma ? + and - gamma environments. I’m sure by now you guys at tasty are familiar with it
Should also have included EM between $25-$50. There's a large gap between the small and large EM rows that will be very informative.
AMAZING study. But does the study assumes that Delta had no affect in these cases? Do we have a study for Delta as-well?
Love the research though
Theta decay accelerates as it approaches expiration. WOW
Adding to the previous comment, how much risk is associated with selling at the close of business day across a weekend - where one is open to more (geopolitical/economic) event risk? Is the premium worth the risk ?
I think these stats will change in another year. Revisit every year Tom.
Why 830? ISnt SPX trading start at 930?
There's a trader named Logan who does these trades and analysis often for SPX.
Awesome info guys
Beth is the best.
This is exactly the info I’ve been waiting for. Awesome!
IV is irrelevant on expiry day isnt it? Its all about theta and gamma!
Not irrelevant. Bigger factor than theta since IV gets massively crushed on expiration day.
🎯 Key Takeaways for quick navigation:
00:00 *📊 Zero DTE options have significantly higher daily premiums compared to later expirations.*
01:51 *🕰️ Study divided trading day into three equal parts to analyze Theta decay of zero DTE options.*
02:45 *📉 Study examines impact of high vs. low implied volatility on optimal entry and exit times for zero DTE options.*
04:00 *💰 Zero DT straddles lose half their value in the last third of the day, more pronounced with larger expected moves.*
05:38 *🔍 Small expected moves lead to strangles losing half their value at the end of the day, while large expected moves result in early decay.*
07:17 *🔄 Decay of zero DTE options is approximately 100 times faster than typical 45-day trades, indicating significantly higher risk.*
08:54 *📈 Last third of the trading day contributes to about 50% of total decay for zero DTE options, emphasizing the importance of timely position management.*
09:32 *🎯 Compared to 45-day expiration trades, zero DTE options experience much higher decay rates, necessitating careful risk management.*
I think this confirms the benefits of selling 0DTE and getting out before the last 3rd of the - or really the last 15 minutes- when smart money will make large swings
How can I get more profitable investment in the market? Is this pump shorts getting wrecked and liquidated, or any indication of whale, corporate treasury buys?
You're on the wrong channel with those kind of questions.
@Adam longate Gonna have a hard time reaching him as he died last month... Ya'll are some pretty crappy scam artists...
@@nevinkuser9892 You replied to a bot/spam user
Another side note people don’t realize is what kind of losses you realize when your trade goes against you in 0 DTE. You get spanked and where are you gonna roll that out to? I tried it all and I would say you are much better off choosing an expiration at least a few days more out. Maybe you could do a comparison of say 5-7 DTE vs 0!DTE on Theta and talk about naked options in that light as well.
i bet atleast 2-3 days and taking profit at 50% will spank 0dtes over time
I believe 0 DTE is where most of the money is lost if the trade goes against you it seem like you have to go to hell and back just to recover and then you have to go lower just to get some profit
Lord forbid you got some puts/calls and the price is just consolidating a over support
I know you guys don't respond to comments but I'm going to leave this here anyways. 4:33 He asks a good question that wasn't answered and I think needs to be clarified. Is the 2nd and 3rd "traunch" of theta decay a percent of the original value of the option? Or is it a percent of the remaining value of the option after the 1st traunch of the day? If its the later, than the first traunch has a slightly larger overall decay percentage of the original value than the 3rd traunch does. Taking a round number of 100 and using the lower EM, we expect a $30 total value decay whereas the third traunch would have a value decay of $28.