SPX 0DTE Trade Definitions

Credit: The net premium received when selling to open the credit spread.

Credit = (Bidshort - Asklong) * 100

Max. Loss: The risk and maximum loss of the credit spread, incurred if both legs expire in the money.

Max. Loss = (ABS(Strikeshort - Strikelong) * 100) - Credit

R/R: The return-to-risk ratio of the credit spread.

R/R = Credit / Max. Loss

Prob. OTM: The approximate chance of the short leg option expiring out of the money and the full credit being retained.

Prob. OTM = (1 - N(d2short)) * 100

The main factors in the risk-neutral probability calculation for a credit spread are the underlying’s price relative to the short strike, the underlying’s volatility as implied by its near-term options, and the time remaining until expiration.

The drift factor of the formula is determined by the risk-free interest rate, and if applicable, the underlying’s dividend yield.

s = Underlying price.
k = Strike price.
t = Time remaining until expiration.
r = Continuously compounded risk-free interest rate.
q = Continuously compounded dividend yield.
v = Volatility.
N = Cumulative distribution function.

d2 = (LOG(s / (s + ABS(s - k))) + (t * (q - r - ((v ** 2) / 2)))) / (v * SQRT(t))

The model assumes random movement in the underlying without influence from catalytic events occurring before expiration, such as an earnings report or unexpected news. It reflects the expected moneyness at the time of expiration only, and not the probability of the short option moving into the money at least once before expiration and possibly being exercised.

If applicable, the underlying’s next estimated earnings report date is displayed in the row below.

(EV) Expected Value: The average credit retained per trade after factoring in expected losses.

Vertical credit spreads:

EV = (Credit * (1 - N(d2short))) - (Max. Loss * N(d2long)) - (MIN((ABS(Strikeshort - Strikelong) * (1 / (1 + (N(d2short) / N(d2long))))) * 100, Max. Loss) * (N(d2short) - N(d2long)))

Diagonal credit spreads:

EV = (Credit * (1 - N(d2short))) - (Max. Loss * N(d2long)) - ((MIN((ABS(Strikeshort - Strikelong) * (1 / (1 + (N(d2short) / N(d2long))))) * 100, Max. Loss) - expected extrinsic value of long leg at short expiration) * (N(d2short) - N(d2long)))

This interpolation is the sum of the results of a credit spread’s three possible outcomes.

  1. Short leg expires OTM: The full credit is retained.
  2. Both legs expire ITM: The maximum loss is incurred.
  3. Short leg only expires ITM: The price of the underlying at expiration is in between the strikes. A submaximal loss equal to the payout of the short leg is incurred.

    For vertical credit spreads in this situation which aren’t comprised of cash-settled index options, additional losses could occur due to pin risk since the hedging long leg has expired worthless. To mitigate this risk, close positions that are near the money at expiration.

    The expected value for diagonal credit spreads in this situation benefits from the remaining time value of the long leg offsetting the cost of the short leg’s exercise.

A positive expected value indicates a statistical edge and profitability over time, meaning enough credit is collected on each iteration of the trade to offset its potential losses excluding commissions.

(ER) Expected Return: The expected value per trade relative to the capital risked.

ER = (EV / Max. Loss) * 100

(AER) Annualized Expected Return: The expected return with respect to the time remaining until expiration, representing the capital efficiency of the trade.

AER = (((1 + (ER / 100)) ^ (1 / (business days until expiration / 252))) - 1) * 100

(POP) Probability Of Profit: The approximate chance of the underlying price being at least $0.01 away from the break-even price of the credit spread at expiration.

Call credit spreads:

POP = (1 - N(d2breakeven)) * 100

Put credit spreads:

POP = (1 - N(-d2breakeven)) * 100

(BE) Breakeven: The break-even price of the credit spread.

Call credit spreads:

BE = Strikeshort + Net

Put credit spreads:

BE = Strikeshort - Net

Net: The market price of the credit spread.

Net = Bidshort - Asklong

Bid: The bid price of the short leg option.

Ask: The ask price of the long leg option.

(IVP) Implied Volatility Percentile: The percentage of days over the past year when the underlying had a 30-day implied volatility value lower than its current level.

(IVR) Implied Volatility Rank: The underlying’s current 30-day implied volatility relative to its highest and lowest levels over the past year.

(IVSP) Implied Volatility Skew Percentile: The percentage of days over the past six calendar months when the underlying had a 30-day implied volatility skew lower than its current level. This is a comparative measure of investors’ directional sentiment and is derived from the underlying’s ratio of OTM and ITM implied volatility.

The sentiment is displayed in the row below, with percentiles 0-39, 40-59, and 60-99 representing a bullish, neutral, and bearish outlook respectively.

To the right of the sentiment is the time since the underlying’s options were scanned, representing the age of the data. Hover to reveal the exact time of the last update.


Jim Olson Iron Butterfly 0DTE Trade Plan

Iron Butterfly involves selling the ATM call and put and buying wings.

Sell the Open in the first 1 minute. The official open price for SPX is almost never accurate because all 500 stocks don’t immediately have bid at open. I wait 10 – 15 seconds after open to see where SPX is trading. This is the price I use to determine the strike I’m going to sell. I never try to guess direction with the Iron Fly. If SPX is trading at 3102.50, I would do $3100 or $3105. I would never do further out and try to guess the direction of the market. I don’t care what indicators you use. Price action is all that matters and will always win. By selling the open the most premium decay will happen in the first 30 minutes regardless of the IV environment.

SPX options start trading at 3 AM Eastern. They stop from 9:15 to 9:30. At 9 AM I start looking at the options to see where we are trading at. I look at what the Implied Move for the day is. I look at see what type of credit I can get. If the Implied Move is under $30, I will simply use $50 wings. If the Implied Move is over $30 you will need to increase the wing size so you can get out of the trade faster. The more money you pay for the wings the longer you will stay in the trade. Never look at the options from 9:15 to 9:30 because the option prices will be messed up.

Example on June 15th 2020

The ATM $2980 Call and Put was ~ $45.50 at the open.

$50 Wings $2930/2980/3030 the credit is $33.80. So the Wings cost you $11.70

$60 Wings $2920/2980/3040 the credit is $37.15. So the Wings cost you $8.35

$70 Wings $2910/2980/3050 the credit is $39.70. So the Wings cost you $5.80

$80 Wings $2900/2980/3060 the credit is $41.25. So the Wings cost you $4.25

$90 Wings $2890/2980/3070 the credit is $42.55. So the Wings cost you $2.95

$100 Wings $2880/2980/3080 the credit is $43.50. So the Wings cost you $2.00

My general guideline is to keep increasing the wing size by $10 until you stop receiving at least a $1.00 extra credit. So in the example above I would you $80 wings. In my opinion it isn’t worth it to go $10 wider from $90 wings to $100 wings to collect $.95.

I am currently using TOS to trade so I’ll walk through a trade. I open the Trade tab and type in SPX. I pull up the 0-DTE option chain. I changed the Spread to Single. Now you can simply hold down the ctrl key and select the strikes you would like. You select the bid side to sell the strike and select the ask side to buy the strike. If you like to use the App turn the Spread to Custom to easily select the strikes you want.

Example from June 21, 2020

At 9:30:30 SPX was trading at $3150.47. So lets sell the $3150 call and put and buy the $3200 call and $3100 put. The mid price is showing a $20.85. I would leave it at the mid price and confirm and send the order. If you don’t get filled in the first minute lower the price by $.10 and send the order again. I usually wait 1 minute before changing the order again. Lets assume we got filled at the $20.85. I always use a limit order to get in and I never lag in. Please note the Break Even Stock Prices (3129.75 / 3170.85) are the prices I use for my stop loss.

Profit Target is $1.50. So $20.85 – $1.50 = $19.35. So I would set my buy order for $19.35.

My stop loss criteria simply the break even stock price. After I get filled I will draw a price line on my chart with $3129.15 and $3170.85. With TOS you can also set a conditional order based on SPX price.

So lets walk through placing a OCO trade. One order will be a buy order to take profit, the other order will be a order to take you out if SPX crosses $3129.15 or $3170.85.

First make a limit order to buy back at $19.35 Then select advanced order and change to OCO.

Click on the first order and select create duplicate order. Change this order to market. Then select the gear icon.

This will open a new screen where you can enter conditions. Put the Symbol to SPX, Method Mark, Trigger >= $3170.85

You can enter another one for SPX with the opposite for $3129.15 Enter Save and then you are ready to confirm and send the order.

Double check on the Order Confirmation page with the conditions to make sure they are right.

How to determine if you can hold of more of a profit. First, I would recommend taking ½ off at the $1.50 target. Look at the current chart with a 30 min candle setting. Compare what the range of the first 30 minutes is. If the range is $10 and you received a $20.85 credit this will increase the rate the ATM options are decaying. If I hold for more profit, I still like to be out by 11 AM Eastern. There is a lack of decay with this strategy from 12pm to 3pm Eastern.

If I get stopped out, I usually enter another Iron Fly near the area I was stopped out. I still keep my $1.50 profit target. The second Iron Fly is simply to help reduce my loss for the day.

Don’t get Greedy!! Remember Base Hits win baseball games. The same is true for portfolio over the long run.


#1 Don’t watch the P/L while in the trade. It is very jumpy the first 15 minutes.

#2 Don’t use TOS to paper trade it. It will give you bullshit fills that you would never get in real life. Instead I recommend just watching the mid price of the trade. To get out you need to see the mid price go past $.15 to $.20 your exit price. This way it is more realistic unlike TOS paper.

#3 Ondemand feature is horrible for this strategy.

#4 Always have the profit order out and sitting. Market changes are very fast.

#5 The wider the wings the better. See my comments above on how I usually increase my wings with the increase in Implied Move.

#6 If you are getting tested near your stop point I will often change my exit to a smaller profit target or even the credit received.

#7 Never ever lag out of this trade. I promise you that you will probably just make it worse.

#8 After 1 hour in the trade if you are underwater, I would consider changing my exit order. If you didn’t hit profit in the first hour your odds are no longer in your favor.



Credit: Jim Olson (Not me).

Vertical Spread – 0 DTE

Vertical Spread

Long Call Vertical Spread

A long call vertical spread is a bullish, defined risk strategy made up of a long and short call at different strikes in the same expiration.

Directional Assumption: Bullish

– Buy ITM Call
– Sell OTM Call

Ideal Implied Volatility Environment: Low

Max Profit: Distance Between Call Strikes – Net Debit Paid

How to Calculate Breakeven(s): Long Call Strike + Net Debit Paid

Long Put Vertical Spread

A long put vertical spread is a bearish, defined risk strategy made up of a long and short put at different strikes in the same expiration.

Directional Assumption: Bearish

– Buy ITM Put
– Sell OTM Put

Ideal Implied Volatility Environment: Low

Max Profit: Distance Between Put Strikes – Net Debit Paid

How to Calculate Breakeven(s): Long Put Strike – Debit Paid

Short Call Vertical Spread

A short call vertical spread is a bearish, defined risk strategy made up of a long and short call at different strikes in the same expiration.

Directional Assumption: Bearish

– Sell OTM Call (closer to ATM)
– Buy OTM Call (further away from ATM)

Ideal Implied Volatility Environment: High

Max Profit: Credit received from opening trade

How to Calculate Breakeven(s): Short call strike + credit received

Short Put Vertical Spread

A short put vertical spread is a bullish, defined risk strategy made up of a long and short put at different strikes in the same expiration.

Directional Assumption: Bullish

– Sell OTM Put (closer to ATM)
– Buy OTM Put (further away from ATM)

Ideal Implied Volatility Environment: High

Max Profit: Credit received from opening trade

How to Calculate Breakeven(s): Short Put Strike – Credit Received

Vertical spreads allow us to trade directionally while clearly defining our maximum profit and maximum loss on entry (known as defined risk).

While implied volatility (IV) plays more of a role with naked options, it still does affect vertical spreads. We prefer to sell premium in high IV environments, and buy premium in low IV environments. When IV is high, we look to sell vertical spreads hoping for an IV contraction. When IV rank is low, we look to buy vertical spreads to stay engaged and also use it as a potential hedge against our short volatility risk.

Since the maximum loss is known at order entry, losing positions are generally not defended. We always look to roll for a credit in general, and doing so with vertical spreads is usually difficult.

When do we close vertical spreads?
Profitable vertical spreads will be closed at a more favorable price than the entry price (goal: 50% of maximum profit)

When do we manage vertical spreads?
Losing long vertical spreads will not be managed but can be closed any time before expiration to avoid assignment/fees.

Iron Condor – 0 DTE

Iron Condor

An Iron Condor is a directionally neutral, defined risk strategy that profits from a stock trading in a range through the expiration of the options. It benefits from the passage of time and any decreases in implied volatility.

Directional Assumption: Neutral

– Sell OTM Call Vertical Spread
– Sell OTM Put Vertical Spread

Ideal Implied Volatility Environment : High

Max Profit: The maximum profit potential for an Iron Condor is the net credit received. Maximum profit is realized when the underlying settles between the short strikes of the trade at expiration.

How to Calculate Breakeven(s):
– Upside: Short Call Strike + Credit Received
– Downside: Short Put Strike – Credit Received

When do we close Iron Condors?
Much like other standard premium selling strategies, we close iron condors when we reach 50% of our max profit. This can increase our win rate over time, as we are taking risk off the table and locking in profits.

When do we manage Iron Condors?
We manage iron condors by adjusting the untested side, or profitable side of the spread. We look to roll the untested spread closer to the stock price to collect more premium. We can go as far as rolling our untested spread to the same short strike as our tested spread, which creates an iron fly.

SPX 0DTE strategy

What is SPX 0DTE strategy?

SPX weekly options that expire on every Monday, Wednesday and Friday we trade them on the day it expires. So, there is no overnight risk. Usually we open a credit spread when the market open around 9:30 A.M EST, and we close the trade before market close same day around 4:00 P.M EST. That is why it is called 0DTE, AKA same day option trade.

Why 0DTE strategy?

1. Can Profit if SPX increase, decrease, or doesn’t move at all. (High probability of making money)

2. Limited loss potential. Never worry about “blowing up” when the market makes a huge move (assuming appropriate position size)

3. Very simple strategy. The two primary credit spread strategies only have two components.

4. Consistent daily/weekly income. (why i started trading this strategy personally 🙂 )

What is SPX?

SPX, or the Standard & Poor’s 500 Index, is a stock index based on the 500 largest companies with shares listed for trading on the NYSE or NASDAQ. The term “largest” refers to each firm’s market capitalization or its stock price multiplied by the number of shares it has outstanding.

The SPX itself may not trade, but both futures contracts and options certainly do.

Why SPX?

1. SPX Options expire on every Monday, Wednesday and Friday.

2. SPX pays no Dividend.

3. SPX Cash Settled when the market closes at 4:00 P.M EST.

No risk of early assignment and loss of dividends, no portfolio disruption on assignment.

What is a Credit Spread?

A credit spread where we sell an option at one strike and simultaneously buy an option at another. The way we use this in the SPX Spread Trader is to use a 5 pt spread between the 2 strike prices. So if we are selling a 3100 call we are purchasing a 3105 call at the same time. By entering these two trades as a single credit spread order, there is only a single commission cost. The difference in prices between these two options provides a net credit to your account. The beauty of this approach, is that there is no price movement in the SPX required to be profitable. SPX can go flat or have little movement at all, and our trade will still be profitable. All we need is for the SPX to close below 3100 (in this example), and both options will expire worthless and we retain the credit.

SELL TO OPEN -1 SPX NOV 15 2019 3100 CALL

BUY TO OPEN +1 SPX NOV 15 2019 3105 CALL

Net credit of $0.60. max loss:$4.40

in this example, we are investing $500 to open a bear call spread, receiving $60, and risking $440. as long as SPX stays below 3100 at 4:00p.m. EST, we will keep $60.

Most of the time, we don’t wait till market close. We close the trade at 50-60% profit target, and 2-2.5X credit stop loss.

in this example, we would close it for $0.20. So, we would make 0.60-0.20=$0.40 profit. OR, we would stopped out at $1.50 which is at 1.50-0.60=$90 loss.


Trade Win Ratio

* Around 20 delta


Avg Returns / Trade

* $30 (profit) / $500 (investment)


Profit Target

* 0.60 (credit received) x 0.5 = 0.30 (profit)

2x – 2.5x


* 0.60 credit received x 2.5 = 1.5 (stop loss) – 0.60 (credit received) = 0.90 (net loss 🙁 )