Thought about bracketing the 16th and 84th percentile of the last Nth daily closes. By definition it has ~2\3 winrate (on paper) and ~1/1 payoff (on paper).
I need to understand more in details why would 0DTE be for gamblers and why would 7DTE be considered more reasonable. I think it depends ... 0DTE should provide risks as well as opportunities. As per your image you're telling me that there is too much risks (gamma, vega) per unit of theta.
Found the greeks. Should be fine if it stays within the guts. I understood that IV should be low / decrease. Now if price is running through them I might cut the position.
he’s just being cheeky. there’s no reason 0dte is more dangerous that any other maturity. you have to have a view that an option is mispriced.
That's a good point. Bracketing all the closes with ICs isn't a winning strategy. IV should be higher than future realized volatility. More important than price actually closing within the guts ? I guess ...
P It’s all related. Future realized volatility is where the price will close. iv is where the market will think the price will close. and there are some opportunities between the two. I never traded 0dte for vol explicitly because I don’t have an intraday vol model. But others have built some and there are quite a few research papers on them.
Iron condors make sense when you have time to adjust your position. It is supposed to be a strategy that lets you modify/roll legs depending on how the market is going. For 0DTE there's not much room to act, so the reward is little compared to the risk.
I'll try different tenors targeting the daily / weekly close but currently I think more about it as a binary event (SL/TP) vs managing the position ...
Well ... I don't really have a volatility model. Guess I'll just pass on ICs if the IV or implied move is higher than the estimate based on historical realized volatility. If premiums jump in the meantime then I'll close the position at a predetermined loss (SL). The market is definitely smarter than me.
That's the value of the ±1% IC around last price over 1 week. Constant IV. Need to study this a little. Assuming I buy on the open & sell on the close ... The 1DTE looks like the most interesting.