Options 1k

0DTE Strategies

On this page is a collection of 0DTE strategies I currently use.

SPX METF Strategy #

This is a strategy I first read about on thetaprofits blog -- called the METF (Multiple Entry Trend Following) 0DTE Options Strategy.

At certain/multiple times during the day, you compare two EMA lines (exponential moving average) on SPX. If the shorter EMA (i.e. 20) is above the longer EMA (i.e. 50), then it indicates an uptrend.

In an uptrend, you sell a bull put spread (i.e. put credit spread).

In a downtrend, you would sell a bear call spread.

That's it.

The exact EMAs to use (i.e. 5, 20, 40, etc.), time of day, chart time frame (i.e. 1min, 5min), strike prices, target credit/premium, stop loss, etc., depends on individual preferences.

Here are the parameters I currently use:

Entry Parameters #

Entry Times: #

The entry times I use are based on backtests from the wonderful (and free) BYOB tool. I use the above listed entry parameters.

I export all the trades from the backtest, and see which times on which days have the most positive return. I compare the past 3 months, 6 months, 12 months, and 100 trades.

For example, at time of writing this, 2:30pm on Mondays has good returns recently, so I would enter a trade at that time.

Will share my spreadsheet of best times later on.

Exit #

Allocation #

Maximum 1% loss per day (of portfolio size).

If my portfolio is around $30k, then my max loss is about $300 per day.

Since my target credit is around $1, and my stop loss is 100% of credit, then my maximum loss per trade is also $1.

That means I can take a maximum three positions per day (3 max losses = $300)

If I exit a position early for profit, then technically I can enter more trades afterwards.

May experiment with looking at max 5% loss per week instead of 1% per day, so I can risk more capital on good days. E.g: If Mondays have been historically much better than Wednesdays, I may risk more on Mondays and trade less on Wednesdays.

Automation #

I am currently using Trade Automation Toolbox (i.e. TAT) to automate my 0DTE trades.

It is a bit pricey for beginners ($50/month subscription + $40/month Windows VPS cost), but has worked well so far.

Hopefully I can make enough to cover the subscription costs. 😅

Notes / Thoughts on EMA/METF Strategy #

The METF strategy has been profitable the first couple months of testing it. Hopefully, I can scale it up over time.

It can be pretty hard to look at the losing days. The automation software helps a lot with this, as you can just ignore it for a day and let everything run. I did trade manually at first as I thought the automation software was a bit expensive. I thought about coding my own basic version, but I am pretty satisfied with TAT right now.

I chose the 20/40 EMA sort of arbitrarly. I see many traders using 5/40 or 5/20 EMAs instead, which is a lot more choppy. I guess I like the slighlty smoother 20/40 lines.

Perhaps will do some more of my own backtesting with different EMAs or trendlines later on.

SPX $5 Iron Condor Strategy #

A very simple strategy originally based on this Option Alpha backtest. Option Alpha also did a Youtube video for similar strategy.

The baseline strategy is to sell a 30 delta iron condor with $5 wide wings everyday at 2:30pm. I thought to improve the strategy by backtesting different times and deltas on each day of the week.

For example, this backtest (by someone else) improved on results by trading at 1:45pm on Mon/Tues/Fri only, with VIX<20.

Here are my current optimal setups by day:

Basic parameters #

Monday #

Tuesday #

Wednesday #

Thursday #

Friday #

Summary / Notes #

Best backtest by day of week combined: Link

Maybe need to think about not trading on Wednesday, as results are not that great over past year. Could instead increase allocation on Friday as it has best profit factor?

Hybrid IC Strategy SPX #

I thought to further build on the above iron condor strategy by splitting it into separate parts.

Basically, enter the put side and call side at different times/deltas to see if it improves results.

Initially, here were the baseline tests:

PUT CREDIT SPREAD:

CALL CREDIT SPREAD

I realized though that I am basicaly doubling a lot of my entries of the daily iron condor strategy above. So, I decided to only enter if the best times were significantly different.

Monday #

Tuesday #

Wednesday #

Thursday #

Friday #

High VIX #

I found that the put side performs very well in high VIX environments (i.e. VIX > 20). VIX >25 also performs well, but there is a lot less positions. (Backtest)

So, I will enter additional positions on Tuesday/Wednesday/Thursday/Friday at 3pm if VIX>20, and daily EMA>10.

Summary #

Leg into iron condors on Tuesday and Friday based on times above.