Opening Range Breakout: 0DTE Options Trading Strategy Explained

The Opening Range Breakout (ORB) strategy enters a position after a breakout above or below a symbol's early trading range. Options day traders use the opening range as a buy or sell signal to initiate trades, looking to capitalize on the market’s initial momentum with 0DTE options. Early price action during the first hour is used to trigger a trade following the day’s trend.

This article explains the opening range and how to use breakouts to enter directional trades with options. We’ll explore the backtested results of multiple ORB breakout examples and share a bot template to automate the best backtested ORB entry signal, combining a bullish or bearish breakout into a single automated strategy.

What is the Opening Range?

The opening range is the price range (high and low) that forms during the early part of the trading day. Traders typically establish an opening range by finding the high and low of the first 15, 30, or 60 minutes of the trading day. 

For example, SPX opens at 5,001. By 10:00 am EST, the high and low of the day are 5,004 and 4,995. The 30-minute opening range is 4,995 - 5,004, with a range width of 9 points. Using this 30-minute opening range, a move above 5,004 or below 4,995 after 10:00am is considered a breakout of the opening range.

How to trade the Opening Range Breakout Strategy

The high and low of the first 15, 30 or 60 minutes of the trading day are used to establish an "opening range". A trading signal is generated when the stock price breaks out of the high or low side of the opening range.

Bullish Signal
‍When the underlying price breaks above the opening range high.
Trade: Short put spread with the short strike at or below opening range low.

Bearish Signal
‍When the underlying price breaks below the opening range low.
Trade: Short call spread with the short strike at or above opening range high.

Management
• None required. Hold until end of the day
‍• PDT safe

Additional Options
• Wing width for the credit spreads ($5, $10 or $15 wide backtested for SPX)
‍• Minimum opening range width to establish a signal (0.2% in the the bot below)
‍• No entry after a specific time (12:00pm EST in the bot below)

Automating the Opening Range Breakout Strategy

The bot below fully automates the Opening Range Breakout strategy for SPX. It uses the 60 minute opening range, $15 wide wings and a 0.2% minimum range width. It won't enter a position if the breakout occurs after 12:00pm EST. Here is the backtest used to generate the bot: ORB 60m - $15 wide

Opening Range Breakout 15/30/60 minute backtest details & results

To optimize results, we tested multiple position settings using the 15, 30, and 60 minute opening range. The backtests below had the best performance using a $15 wide 0DTE credit spread. and the following entry criteria:

• A 0DTE short put spread is opened at the opening range low price on a breakout of the opening range high (blue line).
• A 0DTE short call spread is opened at the opening range high price on a breakout of the opening range low (orange line).
• Combined the two positions into a single daily strategy opening one position per day after the initial ORB (grey line).
• Minimum opening range width of at least 0.2% of the underlying's open price to ensure the opening range is wide enough to generate a signal.
• Did not enter a trade after 12:00pm EST.

60-minute ORB Backtest Results

• Total P/L: $23,387
• Win Rate: 89.4%
• Average P/L: $39/trade
• Profit Factor: 1.44‍
• Max Drawdown: $-3,453
• Click here to see backtest

30-minute ORB Combined Strategy Results

• Total P/L: $19,555
• Max Drawdown: -$8,306
• Win Rate: 82.6%
• Average P/L: $31/trade
• Profit Factor: 1.19
• Click here to see backtest

15-minute ORB Combined Strategy Results

• Total P/L: $19,053
• Max Drawdown: -$7,602
• Win Rate: 78.1%
• Average P/L: $35/trade
• Profit Factor: 1.17
• Click here to see backtest