About this template
Hey Traders, we're happy to share this bot which is the culmination of a recent Research Project that analyzed 230k live 0DTE trades.
Bot Overview:
Type - Credit Spreads
Symbol - SPY
Entry Time - 10:30 am
Exit Options - 85% Target - exit 1 hour before expiration
Schedule - Monday and Wednesday
Position Limit - 1 per day
Position Size -1 Contract
Research Overview:
Almost one year ago to the day, we analyzed over 25,000 0DTE options trades to assess how Option Alpha traders leverage automation to set up and execute same-day strategies.
Last year’s blog focused on the most popular symbols and strategies, highlighting position details, successful setups, and automating 0DTE trades. While there have been rumblings since then of optimal 0DTE strategies, backtesting has its limitations and is hard to prove.
Now, with 10x the data, our goal is to uncover what successful 0DTE traders are doing so we can assess quantitative statistics that impact performance and apply it to our trading. Nothing has ever been done on this scale at the retail level with live data.
This research explores the variables that successful short-term traders have in common here at Option Alpha. We’ll also dive into specific autotrading strategies and share the advantages of automating key components, such as entry and exit time, profit targets, stop losses, and market conditions.
All research data is anonymous. No personal identifiers or brokerage account information is ever used. Trade statistics that come directly from the platform include only non-identifiable position details such as entry and exit date, strategy type, underlying symbol, and performance metrics. Our research team analyzes this anonymized data to better understand how traders use our platform and share objective research insights with our community.
0DTE Review: 1 Year & 200k Trades Later
0DTE trading continues to be a very popular strategy, both inside Option Alpha and in the options trading market as a whole. In fact, our traders have opened and closed ten times the amount of 0DTE trades in Option Alpha since last year’s research report, bringing the current total to 230k 0DTE trades.
Line graph showing the weekly volume of 0DTE trades at Option Alpha since inception.
Most popular symbols and strategies
Similar to last year’s research, traders continue to open the vast majority of 0DTE positions in SPY, although the total percentage of SPY trades has decreased from 88% to 81%. QQQ was the second most popular symbol, while all other tickers combined for less than 6% of positions. This makes sense considering SPY and QQQ now offer daily expirations, a change to the 0DTE landscape that occurred in late 2022 as you can see in the image above.
Pie chart showing the distribution of 0DTE trades by ticker symbol.
Likewise, iron butterflies are still the preferred strategy type for Option Alpha 0DTE trades. Including iron condors, neutral strategies accounted for twice as many positions as directional credit spreads.
Bar graph showing the distribution of 0DTE trades by position type.
Best days to trade 0DTE
One interesting metric we added to this study was examining if the day of the week had a significant impact on profitability. And, in fact, it appears that it did. Monday was by far the most profitable day for 0DTE strategies. Tuesday, Thursday, and Friday all had a negative P/L.
Average P/L of every 0DTE trade for each day of the week.
Are 0DTE Traders Successful?
The short answer is... yes. And no.
At first glance, 0DTE options strategies seem to be nothing more than a fair coin flip.
49.64% of Option Alpha traders using a 0DTE strategy are profitable, which is interesting in its own right, considering many traders already consider 0DTE trading to be a 50/50 bet.
However, there are observable commonalities amongst successful short-term traders at Option Alpha.
Characteristics of Profitable 0DTE Traders
This research represents the activity and habits of the roughly 20% of Option Alpha 0DTE traders who have over 100 trades and are net profitable. 100 trades was chosen arbitrarily, but should provide a “good enough” filter to represent a serious 0DTE trader.
The results provide a comprehensive overview of the trading behaviors and performance of profitable traders for different strategy types, holding periods, and entry and exit conditions.
The research showed that three key variables led to better performance:
Strategy type
Entry & exit times
Profit targets & stop losses
Neutral strategies
Neutral strategies were not only the most popular setups, they also had the best performance overall. Iron butterflies and iron condors comprised 78% of 0DTE positions, and had win rates of 66.76% and 70.19%, respectively.
Entry & exit time of profitable trades
Most profitable trades were entered after the morning volatility and remained open for an average of approximately two hours. Broadly, consistently profitable traders opened positions at approximately 10:15 AM ET and closed shortly after 12:00 PM ET.
Line graph showing the entry time for all profitable 0DTE trades at Option Alpha.
Line graph showing the exit time for all profitable 0DTE trades at Option Alpha.
Optimizing profit targets and stop losses
Next, we wanted to determine what the most common exits were for both profitable and losing trades, since the majority of these trades were not held until expiration.
The average percentage gain and loss for each strategy type highlights where successful traders are putting their profit-taking and stop losses.
The average gain and loss % for profitable 0DTE positions.
Key Factors of Profitable Positions
We wanted to focus on the specific data points that led to positive returns.
Here are the complete calculated statistics for all strategy types used by profitable traders with more than 100 trades:
Average trade duration
Average gain
Average loss
Average risk
Average contracts
Percentage of winners
Percentage of losers
Average RoR for profitable trades
Average RoR for losing trades
Average dollar profit for profitable trades
Average dollar loss for losing trades
Average profit/loss per trade
Average time after market open that profitable trades are opened
Average time before market close that profitable trades are closed
Average time after market open that losing trades are opened
Average time before market close that losing trades are closed
Out of curiosity, we also wanted to see if there was a similar "seasonality" phenomenon for profitable traders. Indeed, the day of the week he analysis holds true for profitable traders as well. Monday and Wednesday were net profitable, while Thursday maintained consistently negative returns.
Finally, we analyzed performance as "buckets of risk" to determine if there was a relationship or impact between how much is being risked on each trade and its outcome. There did not appear to be any discernible pattern between the amount of risk and performance. 0DTE strategies win fairly consistently, and risking more money does not increase those odds.
It's interesting to note that based simply on strategy selection as a % of the population, profitable traders are choosing iron butterflies, short put spreads, and short call spreads as the bulk of their trading, whereas iron condors ranked 4th in popularity. This contrasts the larger population of all traders, where iron condors are 3rd most popular, however slightly.
Please note: the second half of the original post has been removed to avoid any further confusion about the optimum strategy implementation.
Bot Overview:
Type - Credit Spreads in the direction of the 5 period SMA.
Symbol - SPY
Entry Time - 10:30 am
Exit Options - 85% Target & 190% stop loss, exit 1 hour before expiration
Schedule - Monday and Wednesday
Position Limit - 1 per day
Position Size -1 Contract
