Zero DTE Options Trading Lecture

Introduction to Zero DTE Options

Definition: Zero DTE options are options contracts with zero days to expiration, meaning they expire the same day.
Popularity: Gaining traction due to potential for high returns (2x to 10x) in a short time frame.

Cheap: Lower costs compared to longer-term options.
- Example: QQQ 350 strike call costs $110 for zero DTE vs. $1,600 for 81-day expiration.
Volatile: Greater price changes in response to stock price movements.
- Example: QQQ call price changes by $0.50 for a $1 stock change, showing large percentage changes depending on expiration.
High Liquidity: Heavily traded with tight bid-ask spreads.
- Example: QQQ 350 strike traded 213,000 contracts.
Cash Settlement: Positions are closed the same day, mitigating overnight market risk.

SPY moved from $422 to $431, with the 422 strike call option moving from $1.20 to $9 (9x increase).
430 strike call started near zero, peaked at $1.20, then returned to zero, illustrating volatility.

Scaling Out: Selling portions of your position as profits rise.
- Example: Start with 10 contracts, scale out at 20% and 50% gains, de-risking the trade.
Stop-Loss Strategies: Adjust stop-loss as the trade progresses to protect capital.

Stress and Screen Time: High frequency and volatility require constant attention, which can be stressful.
Health: Monitor psychological well-being when engaging in zero DTE trading.

Opportunities: Potential for significant returns due to high volatility and liquidity.
Risks: High volatility, rapid time decay, and potential psychological impact.
Feedback: Encouragement to share experiences and feedback on zero DTE trading.

Presenter: Chris from Project Finance