Trading 0DTE Contracts: A Practical Guide for Day Traders

Understanding Same-Day Expiration Options

0DTE contracts—those expiring within the same trading session—have transformed how active traders approach daily market movements. Unlike traditional options that span weeks or months, these instruments compress all their value into a single day’s price action, making them unique vehicles for capturing intraday volatility.

The appeal is straightforward: traders seeking quick profits can exploit short-term price shifts without overnight exposure. The underlying asset’s movement on that specific day entirely determines the contract’s worth, creating both opportunity and risk in equal measure.

Market Growth and Accessibility

The journey to today’s popularity began in 2005 when the CBOE launched weekly contracts. Additional expiration days were gradually introduced until 2022, when same-day expirations on major indices like the SPX and SPY became available five days a week. This expansion triggered explosive growth—Goldman Sachs data reveals that roughly 50% of all SPX trading volume now consists of 0DTE trades.

Not every stock offers daily expirations. While all optionable equities technically have 0DTE contracts available at least monthly, the SPX dominates due to superior liquidity and tighter spreads. Weekly-option stocks get them once weekly; monthly-only stocks receive them once monthly. This liquidity advantage makes the index the preferred playground for serious traders.

Key Advantages for Active Traders

Speed and Flexibility: Same-day contracts arrive every trading day, allowing traders to react instantly to news, earnings, or technical breakdowns. No waiting for next week’s expiration date.

Tight Spreads and Quick Exits: High trading volume on indices like the SPX ensures traders can enter and exit positions efficiently without slippage, a critical factor when managing intraday risk.

Theta Decay in Your Favor: Time decay accelerates dramatically as expiration approaches. Sold contracts lose value rapidly, rewarding sellers who positioned correctly.

Critical Risk: Day Trading Rules

Opening and closing a 0DTE contract counts as a day trade under SEC regulations. This means maintaining at least $25,000 in your account to avoid pattern day trader restrictions. If your account lacks this capital, holding a contract until expiration (rather than closing it) avoids the day trade count—but this eliminates your ability to adjust losing positions, significantly increasing risk.

Two Core Trading Approaches

Buying for Scalps: Traders purchase contracts banking on directional moves, capturing quick wins before time decay intensifies.

Selling for Premium Collection: Most professionals favor selling, particularly out-of-the-money contracts. Since any 0DTE OTM contract expires worthless, betting on this outcome creates favorable odds—though market volatility can still generate substantial unrealized losses during the trading day.

Professional Strategies: Iron Condor and Iron Butterfly

Iron Condor Strategy

This approach simultaneously sells a put credit spread and call credit spread on the same underlying asset. It profits when prices remain range-bound until expiration. A 5-wide condor creates a maximum loss equal to $500 (the width of strikes minus credit received). The strategy boasts high probability since any price remaining within the range at close generates profit. However, 0DTE markets move fast—active management is essential if the asset threatens to breach your defined range.

Iron Butterfly Strategy

A neutral strategy for traders expecting stable prices and stable (or declining) volatility. This involves selling both an at-the-money call and put, then buying further out-of-the-money protection on both sides. The advantage over condors: larger premium collection upfront since ATM options command higher prices than OTM alternatives. Maximum risk equals the strike width minus credit received. Many traders target 25-50% profit collection on iron butterflies rather than holding until expiration, given the reduced max loss.

The Reality of 0DTE Trading

Same-day expiration contracts offer legitimate profit potential for experienced traders with adequate capital and active management capabilities. The combination of daily availability, excellent liquidity (especially on the SPX), and aggressive time decay creates genuine trading opportunities.

Yet volatility can intensify rapidly within hours. Unrealized losses may spike even when your final position expires worthless. Success demands discipline, position management, and realistic expectations about profit targets and loss limits.

For traders meeting regulatory requirements and comfortable with intraday volatility, 0DTE contracts remain powerful tools for extracting value from daily market movements.