0DTE options for sellers, measured

What 0DTE means

0DTE stands for zero days to expiration: an option that expires the same day you trade it. SPX now lists expirations every trading day, so a seller can open a put credit spread or iron condor in the morning and have it settle in cash at the close. There is no assignment and the collateral is free again the next morning.

The appeal is obvious. Time decay is fastest at the end of an option's life, and a strategy that recycles its capital every day gets far more trades a year than one that holds for a month.

How we tested it

We replayed 600 trading days of SPX same-day spreads from mid 2022, on intraday bid and ask quotes. The short strike was picked by delta at the entry minute, the wing was about 1% of the index away, every leg was priced inside the same short window, fees were charged, and each trade was held to the close with no stop. Cells covered 10 and 20 delta put spreads and iron condors, entered in the morning or at noon.

What the history says

Win rates were high, from about 85% to 94%. The edge per trade was small: about 0.1% to 0.4% on collateral. The losses arrived as full-width gap days, and the same handful of dates made up five of the six worst days in every cell. The maximum drawdown in the morning cells ran 3 to 5 times the collateral of a single spread.

Sized so the worst drawdown was 20% of the account, the morning cells earned about 1% to 3% a year and the best cell, a 10-delta put spread entered at noon, about 12%. Two of five years were negative or flat in every cell. The noon cell did better because it held for three hours instead of six, which halved the exposure to a gap, not because it found a bigger edge.

Why recycling does not multiply the edge

Selling one day of time means collecting one day of premium. The per-trade credit shrinks roughly in proportion to the time sold, and the chance of a gap through your strike does not shrink as fast. Recycling multiplies the number of fills and the number of gap days you are exposed to, not the edge per unit of risk.

That matches what every premium-selling screen we ran found: the market prices the variance premium fairly closely, and the seller's return is mostly payment for carrying the tail. The guides on position sizing and on selling puts in a bear market cover how to carry that tail without it ending the account.