0DTE options craze
- Thread starter Jdesey
- Start date
Because retail has figured out that you can make more money in 3 days than you can in 30 days with less risk, and better capital efficiency.
I'm looking at an 176 IWM call for NOV3 and the ask is 5.21. That means your break even is 181.21...good luck with that. Your only chance to make money is if it moves early and enough to give you an IV pop...so you might as well just condense the trade down to 3 days instead of holding it for 30 days, paying all that premium and taking on all that extra risk for no return. I mean even if you do a spread, on OCT15 if the price is trading at $180 with the same IV, you only make $120...that's garbage.
I think Destriero is saying the same thing.
Last edited:
I understand the technical parts of what everybody is saying. I think I’m going to stick to trading weeklies. Try to give myself 5-15 trading days to expiration. I have made plenty of profit on those type of trades. One of the problems with zeros if you get it wrong, it’s gonna go against you very very fast at least with multiple days of expiration. You’ve got some time for to work out.
I'm not saying that 0DTE or weekly DTE are easy to make money on, what I am saying is that longer term options no matter what your strategy are a rigged game and a waste of time imo.
I don't understand if longer term options are overpriced sell them. If not buy them
You seem to suggest they are overpriced, then in that case you should be selling them hand over fist
Yes imo the BS is totally skewed toward sellers because they price options based on the potential maximum move and afaik price isn't even weighted to probabilities. I believe tasty trade did an episode on this phenomenon. You can see it if you look at your break evens and expected moves...it basically rarely covers your strike plus premium...ie maximum pain concept. I do sell (cash settled) options or only buy short term. I also think that sellers should be choosing whether or not to exercise the contract or have it cash settled...not the buyers. If you have risk of early assignment that you can't cover then you are at a HUGE disadvantage. I rarely see any option 12 delta or greater not get touched by price in the last week of expiry...even though the majority will expire worthless...and by worthless I mean that even if itm you don't cover your premium. I'm sure there is an algorithm that figures all this stuff out, or this is simply the footprints of market makers shaving profits from a skew in parity on their box positions. I'm not the one to ask about the innerworkings...I'm just observing.
Here is an example: If you buy IWM 176 Jun.21 call @ $15.19. The ATR (based on BS) is +-28.32. but looking at the actual chart you'd be lucky to break 188 by expiry and even if you did, you'd still lose -$3600 on the trade. That is bs. AND that is with no major draw downs along the way...if that happens the IV will tank and you're out. Even if it recovers its like going on a second date and I doubt the IV will return to the same level of excitement again even at same price and factoring in theta.
Last edited:
The fox and the grapes...
Again with that 12 delta being touched "most" times... it's easy to make money then!
Just buy an otm vertical... or an otm fly... you might get X3 return from risk trading otm 10-12 delta.
Oh totally again that's why I only buy 0-5 DTE's and sell on the volatility spike. That's my point, why bother going farther out with lower IV. You can pretty much forget about making profits expiring ITM as mentioned. So it's likely that the IV will only pick up on the last week of the option anyway so might as well start there, instead of betting you will be in striking distance of the market in 5 months to capitalize on the increased IV in the last week...and even then, you paid a higher premium so you're theta toast either way.
Last edited: