Why I trade SPX 0DTE

Spectre
Jan 18, 2024
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Here are the top reasons:

  • Leverage - Every week I will find trades for at least 100% gain but regularly 300% and occasionally 1000-2000%.

  • Time - Trades usually last less than 2 hours to get the results. No overnight risk.

  • Math - I have an incredible advantage due to my experience and my levels and Math let’s me take advantage of that.

So let’s Review:

Leverage

Let’s use a 100k account example. One can risk $1k of the account, to grow the account anywhere from 1-10%. Do that 20 times a year and I’ve easily beat most funds out there . There are over 220 trading days a year.

Here are a few examples of recent trades: (I’ll add examples over time)

  • 2024-01-17
    Contract: SPX 4730c
    Entry: 1.20
    Exit: 3, 4, 10, high: 12

    Return: 400%+
    Time in trade: 30min or less

  • 2024-01-17

    Contract: SPX 4740c
    Entry: 0.20
    Exit: 2, high: 2.80

    Return: 900%
    Time in trade: 30min or less

Time

As you can see in the examples above. The time in the trades was 30minutes or less. 90% of my trades are usually under 2 hours.

Given the way the markets move, I don’t have to watch screens all day. I usually set alerts at key levels and times and check in on market to see if price action aligns with my levels or thesis. I can then use Edge Trade Planner to quickly determine my risk/reward.

Math

So with any trading strategy, you want to be able to have measurable returns. I underpeform vs the opportunities I see everyday, but the power of math can’t be underestimated. Math let’s me take advantage of the balance of time, premium, momentum to steal money from the market.

I can take trades that I know will go to 0 by end of the day but I can enter for say $0.50 and sell for 2-4 before it gets to 0. There isn’t guessing, it is math that let’s me extract that money.

Why I Trade SPX vs SPY

So you might be wondering why I trade SPX instead of SPY since it also has 0DTE contracts now.

  • Settlement. SPX is cash settled and there is no risk of margin calls or getting exercised.

  • Avoid Broker issues. I’ve had brokers close out ODTE trades during the last hour to manage their own risk. I’ve also for the same reason, had them prevent opening a trade during the last hour. As you know that last hour is where I’ve sometimes made 10x gains

Can Small Accounts trade SPX?

Yes but you have to be much more selective. And take profit quickly if targeting far OTM contracts. Don’t sit in them more than 30min to an hour if not already profitable.

Let’s run some numbers regarding margin and risk on SPY vs SPX:

Let's say we are bullish on SPY/SPX and want to long SPY 557c or SPX 5570c and have $5000 in capital and allocating 10% to the trade or $500.

So… SPX 5570c for $5 and SPY 557c for 0.50.

SPY: you can take 10 contracts for $500

SPX: you can take 1 contract for $500

Profits:

Assume SPY runs at the close to 559, and SPX to 5590

SPY 557→559: $2000-$500 = $1500

SPX 5570-5590 : $2000-$500 =$1500

No difference right?

Wrong. 10 contracts of SPY = 1000 shares of SPY, and if exercised at close: 1000*557 = $557,000 to secure the shares. Now for a $5k account, will the broker want to carry the risk of you not closing the position by end of the day? Maybe at 2:30-3:30 pm SPY has dipped to 557.20 and: SPY 557c is worth 0.40 and SPX 5570 is worth $4. The broker could kill your SPY call trade. and you lose $100 while the SPX trade is left alone.

If you had the margin and capital, what happens at the close?

you get exercised and you are now deploying 557,000 with $2000 of profit in the money.

with SPX, they just deposit $2000 into your account. no fuss, no exercising, your $5000 account is now $6500.

Now lets do something wild…

Let’s instead take 50 contracts of 5590c at 0.10 instead of 5570c at $1. Same $500 right? Depending on timing, when SPX hits 5590, lets say at 3:55pm. these might be worth $2. you now you can sell for $10000 - $500 making $9500. Mind you, if you are buying at 0.10, there is a reason they are so cheap.. 99.5% of the time they will go to 0. But a small account can actually do this! For that 1 in 200 chance you are right, you can turn $500 into $10k using SPX options.

Assume you tried to do the same with SPY. That would be 559c for .01 so you take 500 contracts and they might spike to 0.20. That is $10k again.. Cool right!
There is no way a broker is going to risk letting you control 5000*557 or $2.7m worth into the close! The buy order will either be rejected or immediately closed upon opening by broker’s risk management team.

You might be thinking these 10 or 20 baggers never happens, take a look at the history of my alerts. I regularly find trades at $0.20-$2 that go 10x!

A Small account can definitely trade SPX but you have to be patient on 0DTE or go far OTM on next day contracts.

Dangers

black and yellow poison sign
Photo by Mikael Seegen on Unsplash

Anyone wanting to “gamble” / trade this highly lucrative environment must know the dangers. Capital and Risk Management is essential.

Trading SPX 0DTE takes a ton of patience and planning. Patience for entries and exits. There are significant gains and losses that can be incurred.

Once you are on the wrong side of time and direction, A contract can easily go to 0 and I have lost my entire position multiple times

A news event or choppy action can easily trigger a 50-80% loss within minutes.

Next steps

Get on the waitlist for SPX 0DTE Alerts

Get on the waitlist for the Intro to SPX 0DTE Options course.