What is 0DTE?
0DTE options, also known as “zero days to expiration” options are options contracts where the expiration day falls on the same day it was purchased. While 0DTE transcends ‘overnight risks’, these financial instruments are Not for the faint of heart. Higher exposure to gamma and theta means that these options can speed up (and slow down) in the blink of an eye. In other words, buyer beware: these aren’t “high-probability deals” – they are Tools It is better to deal with experienced traders.
However, that did not stop 0DTE options from being a popular strategy for retail options traders. why? Because 0DTE options are often cheap, and have huge traffic potential.
Both are on the upside…
On the negative side…
Stories of dramatic ups and downs like the one above have given 0DTE options a certain stigma, and have led some to view 0DTE options as nothing more than a gamble, or “Lottery Trade”. who – which Can be honest. 0DTE options Can Used to make highly leveraged “bets” on the direction of a stock’s price. However, for experienced traders who know how to operate 0DTE options, these financial instruments are highly effective tools that require only a small amount of capital to function.
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Trading 0DTE Options: 5 Rules to Live By
1: You have a catalyst
With every deal, you should keep in mind a clear catalyst. its yours the reason To enter the trade, the most important for 0DTE options. These fast-paced options trading tools are armed with a lot of realism, but burdened with an uncomfortable amount of theta. This means that while the expected movement does not necessarily need to be so bigit should happen fast for the strategy to work as intended. This puts a lot of weight on the catalyst to offer, lest these options fade into oblivion. As such, 0DTE options are for High bar deals Just – If you are not sure about the catalyst, wait for the next catalyst. In other words, when it comes to 0DTE: When in doubt, let it go.
2. Only risk what you can afford to lose
Like the need for a catalyst, this is another important rule of Which Trade options, but they are of paramount importance to 0DTE options. these contracts Literally “Here today, gone tomorrow,” so you need to prepare for the (hopefully) occasional, sometimes uncomfortable, but ultimately inevitable trading. You can do this by sizing deals appropriately, and not taking it personally if a deal isn’t going your way. Even the world’s top traders aren’t 100% accurate – they win more than they lose, and they Never allow a single transaction to flip the wallet.
3. Understand the techniques
Technical analysis is what the majority of algorithms (and thus the majority of stock trading) rely on when entering and exiting trades. For this reason, intraday breakouts and technical failures can lead to high-speed moves in the market as fast trading algorithms scramble in and out of stocks. This phenomenon gives support and resistance lines a kind of magnetism. For this Knowing where key technical levels lie can give traders an edge. But it won’t make a difference if you don’t follow these last two rules.
4. Make a plan
Trading plans very Important, but it doesn’t have to be complicated. They just need to set clear rules about when you will enter and exit a trade – whether a trade goes your way or not. In the live daily trading community of Market Rebellion Rebel pitEach trading idea includes a plan with the following details:
- catalyst: Often a technical breach or malfunction
- strategy: The type of trading (option contract and strategy) used to profit from an upward or downward price movement
- Operator: position entry point.
- stop loss level: The point at which the price trend moves against you, canceling the trading hypothesis. When the stock is trading below this level, traders should close the position.
- Target profit levels: The level(s) at which the trade has become profitable, and traders should look to take profit from the position, either by putting up or closing the position.
5. Stick to the plan
Making a plan is just Half the battle. Commercial discipline means following your game decisions and leaving your emotions at the door. Many traders lose money due to their failure to close or execute a profitable trade. Similarly, many traders have too much By sticking to an option for longer than it should. It doesn’t matter that they are “cheap” – 0DTE options trades need to be approached with as much discipline as any other trade. Make a plan and stick to it.
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Intraday Options 0DTE Method “Rebel Pit” – Example #1: COST
To see how it works in practice, let’s analyze 0DTE options trading plan from September 9, 2022 targeting a bullish breakout at Costco (COST).
- If COST exceeds $533.03 (Effects), consider buying $532.50 0DTE calls for about $2.50.
- Using ITM’s slight strike prices when trading 0DTE options is a popular topic within the Rebel Pit. Intent: to deny theta decay as much as possible while still being exposed to fast-paced price movements.
- If the COST falls below the trigger or the option fades to 50% of its value, close the position (stop loss).
- If COST exceeds $534.84, consider taking a profit. There are several ways to do this:
- Sell some or all options immediately (close option)
- Sell a different call against the pre-existing option by multiplying the higher (post the option)
- Sell the call and simultaneously buy a cheaper price, away from the money call (wrap cucumber)
- If the COST price exceeds $537.83, repeat the above step by either Rolling, Spreading, or Closing the option.
When this trading idea was published on Costco, the stock was trading at $529.12. After a few hours of choppy trading, COST shares surged on gas – and decisively broke above the breakout level ($533.03) at 12:50 PM ET. Within 25 minutes, Costco exceeded its first profit target ($534.84). A move of $1.81 on an ITM 0DTE option represents an intrinsic value added of $181, plus any additional extrinsic value. For some traders, the story ends here. They close the trade completely and move on to the next stage.
However, for traders who have chosen to stay in the trade (either by moving to the next strike or… spread out trade), the new target to watch is $537.83 – the new stop loss is the old resistance line ($534.84). Other than the changing target area, the trading plan remains the same: Traders want to see support held steady as the shares of the stock rise through the upper level.
In this case, COST shares successfully tested the red support level ($534.84) without breaking below. Unfortunately, COST stocks failed to break above the next level of resistance after several attempts. When the stock repeatedly tries and fails to break above the resistance level, this is a sign that the stock is running out of momentum. In these cases, it is often best to close the deal.
Intraday Options 0DTE Method “Rebel Pit” – Example #2: AVGO
Here’s another example from the same day, targeting a similar bullish breakout at Broadcom (AVGO) using slightly ITM 0DTE call options.
- If AVGO exceeds $520.38 (Effects), consider buying 0DTE 520 calls for about $2.75.
- Again, this trade takes advantage of ITM options quite a bit. If this trade were in OTM options, the risk of theta decay would be much higher. The fact that it is small ITM means that traders have at least exposure some intrinsic value.
- If AVGO falls below the trigger or the option fades to 50% of its value, close the position (stop loss).
- If AVGO breaks above $522.74, consider taking profit (again, either by closing some or all of the options contracts, putting options, or putting options).
- If AVGO breaks above $525.98, repeat the above step by either Rolling, Spreading or Closing the position.
When this trading idea was published on Broadcom, the stock was trading at $517.67. At the open, Broadcom started to rise, breaking above the trigger level ($520.38) around 10:30 AM ET. inside 30 MinutesAVGO shares rose above $522.74, the first resistance level. Note that in both the COST example and this AVGO example, a breakout above resistance often leads to rapid price action. This is why it is so beneficial to use technical analysis when trading options.
Like the COST trade, when the stock breaks above the first target level, traders are faced with two options: Remove some From position, or removed All from the position. Merchants who choose to remove some In order to maintain exposure to the trade, the orange line will be seen as the next technical level of resistance, and the red line as support.
After AVGO broke the first resistance level of the target, it continued to move towards the orange line before forming a double top and rejecting it. Rejection sent AVGO home to the first target level, which immediately penetrated below it. With the support nullified, it’s time to stick to the plan, close the rest of the deal, and move on to the next stage.
Bottom line: Don’t make 0DTE options trading more risky than it needs to be
There is no shortage of people who will tell you that trading 0DTE options is dangerous or high risk. And they’re not wrong – traders who don’t know what they’re doing can end up watching 0DTE options go to zero in the blink of an eye. However, for disciplined traders with a deep understanding of technical analysis, 0DTE options are among the most powerful tools the stock market has to offer.
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