Tastylive: How We Trade 0DTE With 90% Less Capital
Traders have flocked to zero-day, or 0DTE, trading with their options. Since these options started trading nearly two years ago, they’ve grown substantially. 0DTE trades now account for nearly half of all options trades.
Investors have plenty of strategies that they can employ with 0DTEs. Some of these strategies can be costly. But there are several tools available to allow for profitable 0DTE trading with substantially less capital involved.
One strategy is to use a strangle. A strangle involves buying and selling an option with different strike prices, but the same expiration date. In essence, the trader is looking to make a small profit. At least as long as a stock or index trades within a certain range.
A short strangle can have higher risk, but can be built at a lower cost of capital compared to directional options bets. Plus, far out-of-the-money options can avoid capital restrictions. That also allows for traders to use less capital.
Typically, a 30-delta strangle option would carry a huge cost for investors. They may need to put up over $100,000 in capital. But by using more out-of-the-money trades, investors could make a similar return while risking just 1/10th of the capital.
So, investors should look to buy cheap options and using strangle trades. That will help maximize returns and lower capital costs on 0DTE trades.
For the full study behind this trading strategy, click here.