The market ripped higher before trading hours (pre-market) today, if you bought one of the 0dte options from the call side yesterday you’d be ITM (in the money). However, as most experienced traders know, holding their types of zero-day-to-expire options overnight is extremely risky.
Market report: Spy 0dte Options 607 CALL
The chart above shows the Spy 0dte Options 607 call (Dec 11, 2024), now let’s dive into a few trade possibilities with this option. The options chart follows the Spy and ES to a degree as there is slippage due to theta decay which you must keep in mind.
The market pulled back pretty hard yesterday which made this trade enticing to get in on. Plus there was some good news at 5:30 am that aided being bullish to the upside.
Entry Point:
From a technical aspect, a good entry point would have been around the .45 mark. It continued to go up which means a trailing stop would have been ideal for this trade as it never dipped below the entry point. Just let it ride until the stop was triggered.
Exit Point:
The best overall exit point would’ve been around the 1.40 mark. The chart technicals (moving avg, bollinger bands, RSI, CCI) on the Spy & ES were getting way over extended at this point and due for a significant pullback.
This 0dte options trade scenario represents a 3.1x, meaning a 300% profit plus a tad more could’ve been made from this 2-hour trade.
Profit Example:
- 100 contracts bought at .45 ($4,500 investment)
- 100 contracts sold at 1.40 ($14,000)
- Minus $4,500 investment = $9500
- Minus 100 contracts cost at .65 ea ($65)
- Total Profit: $9,345
Key Things to Watch:
- Eyes on the charts for Spy, ES, and the option strike simultaneously.
- Technical indicators on the SPY supersede all else.
- Level 2 has insights into how much demand is on the ask/bid.
Conclusion:
The fact that the market spiked in the pre-market made buying a call option on this trade very risky as a pullback was expected, but the technical indicators said otherwise. That is why it’s important to pay close attention to them. The 5-minute, 15-minute, and 1-hour chart time frames are the most telling with the 1 minute giving insights of “right now”.
These types of trade scenarios happen every day when trading options with 0dte on Spy or QQQ (the only 2 that offer 0dte options). It’s very possible to catch a 5x, 10x, and even 30x a few times per month.
If you miss it today, you may be able to catch it tomorrow…
