Hello, I’m trying to wrap my head around how to profit from a specific situation on daily SPX (0DTE) options. When the NY session starts and a certain condition is met, I usually need to bet that price won’t close outside the specific price. For example, if the underlying price is 5000, I want to bet that it won’t breach and close below 4950 on that day. What would be the most efficient way to do that having in mind that I need to have my losses limited in a case trade going against me below 4950 and stay in profit if price closes above 4950, and also have at least 1:1.5 win/loss ratio? I have spent months trying to figure it out, but no luck. If anyone comes with working solution I will be more than happy to reward it. Is there any efficient way to trade this?
1% otm "bull put spread" 0dte right now, has a reward/risk of 1:10, but you should know this if you spent months trying to figure things out.
Yes, 1% is extreme. It's just for reference, in reality it fluctuate 0.30% - 1%, I'm just looking for a most efficient solution, closest thing to my described situation.
Price the 4950/5000 bull spread. This is a test where you win for answering 2 + 2 + __ ? 0DTE is all gamma (over vega) but the shit is still dynamic. Nobody can answer that Q w/o looking at price, macro and vol-line.
I'm not asking about specific price range that is right now, it's wider question. Spreads wont work here, price is too far from the breakeven point when I need to open a trade and offers bad RR.
rn the 5865/5915 (ATM) ps short is 11-12. So you're risking 4/1. No way you're going to achieve 3/2 risk on index on 0DTE. As you go narrow (digital replication) the risks get worse. Take it to 1-2DTE.
You'd need to do an asym fly or perhaps (that) with a risk reversal in M2 (structured as a fly as well).
If you cap it on both sides (iron condor), let's say +o- 0.5%, you'd improve the risk/reward... But on 0dte your risk would still be X2 your reward today. And that is only on 25 point move. 1% is not extreme. I don't think you'll find an easy edge on 0dte. And if you handpick the days, you'll probably select "quiet" days, no major news etc... And that won't help.