---
title: '0DTE Options Strategy: How to Maximize Risk-Reward & Mistakes to Avoid'
source: 'https://youtube.com/watch?v=3mT2rfuhXoU'
video_id: '3mT2rfuhXoU'
date: 2026-07-28
duration_sec: 1376
---

# 0DTE Options Strategy: How to Maximize Risk-Reward & Mistakes to Avoid

> Source: [0DTE Options Strategy: How to Maximize Risk-Reward & Mistakes to Avoid](https://youtube.com/watch?v=3mT2rfuhXoU)

## Summary

This video presents a comprehensive guide to zero days to expiration (0DTE) options trading, focusing on risk management, common mistakes, and a unique approach of visualizing options as a chart. The presenter shares specific rules for entry, profit-taking, and stop-losses for directional trades and credit spreads, and concludes with a live trade example demonstrating a 60% profit in one hour.

### Key Points

- **Introduction to 0DTE Risk Management** [00:02] — Covers risk management for 0DTE trades, common mistakes, and a live trade demonstration.
- **Visualizing Options as a Chart** [00:35] — Unique approach of looking at options themselves as a chart, not just the underlying index.
- **Timing the Entry** [02:07] — Due to theta decay, timing is critical; a put moved 385% in the example.
- **Wait for Chart Confirmation** [03:46] — Better to be late than early; use Moxy price trigger and moving average crossovers for timing.
- **First Profit Exit at 100%** [04:52] — Typical first move is 80-120%; take profit there and move stop up.
- **Prepare for 50% Stop-Loss** [06:09] — Expect at least 50% pullback; set stop accordingly.
- **Credit Spreads: Risk-Reward** [07:33] — Selling at-the-money/in-the-money gives better risk-reward but requires directionality; out-of-the-money has higher probability but lower reward.
- **Stop-Loss for Credit Spreads** [09:34] — Set stop-loss equal to the premium received; e.g., if max gain is $200, risk $200.
- **Better Premiums with High VIX** [11:09] — High VIX increases option premiums, allowing larger credits for same setup.
- **Riskier Near End of Day** [12:31] — Less premium to work with; premiums can spike against you quickly.
- **Common Mistake: Strike Too Far OTM** [15:12] — Sweet spot around $3 for out-of-the-money options; avoid cheaper strikes.
- **Don't Let Profits Turn into Losers** [16:18] — Cut at break even if trade reverses; avoid holding for more.
- **News Shocks and Stops** [17:25] — Out-of-the-money credit spreads are vulnerable; always use stop-loss.
- **Don't Chase Last 10%** [18:07] — Exit at 80% profit; below $1 premium is too hard to capture.
- **Avoid Extended Price Moves** [19:16] — Don't sell credit spreads when price has already moved too far in one direction.
- **Live Trade Example** [20:35] — Sold SPX 0DTE call credit spread for $4.30, bought back at $1.70 for 60% profit in one hour.

### Conclusion

Successful 0DTE trading requires precise timing, disciplined risk management, and avoiding common pitfalls like holding too long or trading against the trend. Taking profits quickly and using stop-losses are essential to protect capital.

## Transcript

going to be talking about zerodt trades, how to do risk management with them, and know people make with these trades. Uh I'll also show you a live trade that we the end of the presentation. So we'll kind of get into that as well. And
remember this is for educational purposes only. Also like and subscribe that way you can guys can keep getting more videos like this when you do.
on the kind of zerodte trading that I do, which is a little bit different than I think a lot of other people out there do. Uh, partly it is how I visualize the zero DTE stuff. I don't just look at say S&P or whatever the underlying is. I
actually look at the options in the way that they uh they they work as a chart. Um, and this is something I didn't even know. uh like a year ago, you know, so I a lot of people talk about it. And so if this is still kind of new to you or
you're unfamiliar with it, be sure to come over to the video that I made about zerodt option strategies. The YouTube link is here if you want to copy that. description. So link to that as well.
the rest of this particular presentation for the way that I like to trade zerodt. And I think uh I think it really opens a lot of eyes to traders who just haven't seen this before because I know zero DT is a big deal out there. But have you
ever visualized it? I don't think a lot of people have. All right. So as far as directional risk management, basically this is when you were going long on a zerodt call or put. And this could be
monthly call or put or something like that. Basically the idea about going directional. Now, of course, as we know, the special thing about this is that these are zero DT. They expire this day.
about that to know due to well, data decay. So, let's kind of dive into this and I'll show you guys as I've running through here kind of the riskmanagement things that I see. And I think that timing the entry is extremely important
because you got to get it right. you know, there's really not that much room uh wiggle room in order to make these things work because uh you're you're need to kind of catch that move because you can see that even though we get a
a flash in the pan. They come and then they go and unless the market happens to be trending all day long and even at that if it is trending, you still need to overcome theta decay. Uh there are moments in time when getting long a call
or a put works well. In fact, you can see this was today's example. So, probably going to be watching this later, but from when I made the video today, there was this was a put. Uh the put did move 385%.
one. Um now, of course, you can get different strikes that don't move that much, but it was still a pretty good move this morning. And as you can see, kind of fizzled from there and then didn't really do much. It popped up a
couple times throughout the day. So technically, there are more than one opportunity if you want to take a day trade like this. But the ultimate thing kind of just trade in a range even though the market did move. And so
long on these things, you got to get the timing right. Now, I have some rules and some stuff about that. Uh you can check out the YouTube video or I do have classes at uh Simpler Trading for you guys to pick up if you're interested.
But you can see here that's the Moxy price trigger. And then I just have the moving averages cross over. And that helps me get my timing correct of be going. Now, this is where part of also what I say is wait for the chart to
confirm because, you know, if you're trying to go long anywhere back here, the chart isn't even ready. And that's the whole thing of what I talk about with this is that yes, of course, we're looking at the S&P. for trying to get
figure out a move on the S&P. But if you look at the option on an option chart instead of just the the grid or the option table, it really gives you a different visual aspect of this. And you can just see that this is unlikely to
just not even set up properly. And so what we're really looking for is that kind of entry. And you can see that's the same kind of entry back there. So in this case, that's why I say it's better to be late than early. uh because you
have theta decay. If you're early and you just never get the setup, the thing fade unless it starts to go the direction you want it to go. And so that's why I think that you need to get the setup and if it's going to move,
getting a little bit later is not that bad as long as you know that there's these are short, you know, very quick u because otherwise I could just be wrong about it and the theta decay is then
going to eat you up. All right. And then as far as uh risk management, I like to take my first profit exit at about 100%. I've been doing this a lot. I keep looking at these things and usually what I find is anywhere between 80 to 120% is
can get that first pop, whether you know it's a call or put, you know, that that first kind of oomph on the market, uh it tends to be about a 100% move. And then something like that. And if the market's going to keep going in the direction you
rest of the move. And maybe that'll be 200, 300, 400%, you know, whatever. But, uh, just to make sure that you you protect yourself, you earn some money, I usually find about 100% is is kind of that first typical move. And a lot of
times you get 100% and then it fades and that's it. So, as long as you took your first exit at 100%, you can then now move up your stop-loss and now you've at starts to fall apart. So that's that's kind of a a rule of thumb that I do as
far as trade management, which would be risk management. Okay. And then as far as the entry of the setup, be prepared for at least a 50% stop-loss range. And I what I have also found is that if I can get my entry pretty close, I need to
set at least a 50% maybe even a 60% stop loss. And again, I know that that's a lot, but that's how these things kind of move. You can see here that as this 40% range. And even through here, you can see there's a wick right there.
There's a candle with both ends. That's a 50% range. And that's why I'm saying that unless you get a pretty good entry, like really at the lows, you might be could still move down. It could pull back easily 50% before actually working
whatever you set up, again, risk management, you better be prepared that you're going to at least risk 50% of the premium on this before you could out in your direction. So um you know,
trade um put on the proper trade size um for that. And then this should probably going to be directional, you got to try to avoid choppy days. You of course prefer a trending day. Now, of course, um we don't always know what the day is
going to look like. There can be moments of time and then it can kind of subside you're going to be going directional, you need to kind of have a a big move. That's why I say it's best on days with strong internals, whether it's long or
short short. Uh because if the market is weak and it's strongly weak, great. You that. I mean, look, this is a put right here. This is actually making money on the downside. Or if the internals are strong on the long side, fantastic. You
can buy some calls and you can do that. So that's kind of what I have for here. start talking about credit spreads. So if you're going to be selling a credit spread, whether it is a call credit spread or a put credit spread, this is
for again zero DTE. And this is going to be how you have some risk management with that. So selling at the money or in the money is going to have a better risk-to-reward ratio, but you're going to have to be directionally correct. So
let's just say here you have the money the the markets right here and if you think the market's going to go down you are going to be selling a call credit spread. Now if you sell above where price is that is an outofthe money call
credit spread. If you sell at the money or in or below the money you know in the money then that is going to be another form of the call credit spread. But with with these two down here, with them below the current price of the market,
directionally correct for the market to go that direction in order for them to uh you know appreciate in value for you. Uh whereas the one up above here, you have to be less directionally correct, but the risk-to-reward ratio is not as
and think about this is that an at the money or in the money you could potentially make more money than you are risking. So great, but again you have to be directionally correct. Whereas selling out of the money has an inverse
risk-to-reward uh which is not as great. You kind of maybe look at it and you're like oh I could make $200 but I'm risking $600. And you think like wow that's really bad. Why would I want to do that? Well, because the likelihood
that the outofthe- money credit spread, whether it's a call credit spread or put credit spread, the likelihood that it's going to work out or at least, you know, lose value is good, which is good for you, is higher, something like 80%,
something like that. Uh, and so you're trading off the likelihood, the probability of it working in exchange for the risk. Now, this is where as far as risk management, what you want to do is set a stop. Okay. So, the rule of
thumb thumb generally is that if you're risking, let's say if you're actually potentially make $200. So, that's that's the max gain from this, but you are the max gain from this, but you are risking $600, you know, that that's not
Okay? You have way more money on the line than you could be making. The rule of thumb is that your stop-loss is going to be equal to your the amount of premium you could make. So, if you could make $200, your stop loss is going to be
$200. Another way of looking at that is let's say you are selling a credit let's say you are selling a credit spread for $2. And so, your stop loss is going to be $2 above what you sold it for because that that's the max you
could be making. That's what you want to risk. You don't want to be making potentially $2 and risking six. Okay? That that's just the bad math for you. And that's why I think a lot of people look at the out- of-the- money credit
spreads and they see that huge risk uh because it can it could be significant it and they don't really want to do it. But you have to remember you can set a stop-loss and so you know maybe occasionally it'll kind of spike past it
but really for the most part you have a stop loss. You can control how much you want to risk and if it's only risking $200 versus the $600 you can certainly do that. And so I I don't think you should be too worried about having this
inverse risk-to-reward. You just need to make sure that you protect yourself as far as how you set the thing up. Okay. Um better premiums when the VIX is higher, of course, because the VIX higher. Uh the options are worth more so
you can go further out of the money and still get a lot of premium. I love it when the VIX is up because instead of getting say four or five dollars for a credit spread, I can get seven, eight, maybe $9 for a credit spread and it's
basically the same setup. So, I really like that kind of stuff. In fact, I I love selling premium when the VIX is high uh because I'm doing the same amount of work, but I get more from it. So, I I really like that. Uh now,
there's a lot of also typical things. Selling puts in a market uptrend seems pretty easy, pretty common. Uh, I don't tend to like to do that mostly because for me when the market is going up and doing well, I have so many other stocks
long on calls. I like to be trading individual stocks. The market's doing well. So, I tend to shy away from doing this strategy in a good strong market. I tend to do zero DT and credit spreads when the market starts to get a little
funky and when there aren't as many swing trades available. That's when I like to switch over and start doing some day trades. Uh and then in that case I volatile market because again the volatility is up uh the premiums are up
um the market moves more. So I can find these turns in the market. I can put on a credit spread and I can make 50 60 70 80% pretty darn quickly as long as I get that turn correctly. So I really like that. Uh the other thing that you need
to know is when selling premium it gets riskier closer to the end of the day because as you are narrow u as you are coming to closer and closer to the end of the day there is less and less premium to work with. And so what that
means is that if the market happens to move in a certain direction uh it can move in a certain direction uh it can spike those option premiums a lot at the trying to sell premium first of all there is not a lot of premium to sell
towards the end of the day. And if the market moves, those premiums are going to suddenly swell and that's going to go against you a lot. So, it's kind of a really have a lot of premium to work with and they can go against you very
quickly. So, I tend to like to sell credit spreads uh either well usually in the first half of the day and then also if I can find a turn like let's say the day long and even towards the end of the day, but then I see that it's going to
turn and come back down. Great. there's probably a lot of premium up in those calls that I can sell because they were going up all day and then it moves away that if you really did want to sell it towards the end day, you got to kind of
find inflated premiums in order to sell. Now what I also wanted to show you here, this is kind of the idea and the concept behind uh credit spreads because remember you can only make 100%. Okay, they just, you know, can't go more than
that because what you're trying to do is you're selling premium and premium can only go down to zero. So, if you look at this, if you were able to sell premium here and you brought it down to here, that's still 70%. You know, it's still
70% until it gets to zero. And if you sold it here and here, that's also 70%. that work? Well, because remember the same target zero. So, it there still can
only go to zero. It's just that now you've moved 70% of a bigger value you've moved 70% of a bigger value because now you have $12 to zero versus because now you have $12 to zero versus say $7 to zero. They both still go down
70% but now you're getting 70% of $12 versus 70% of $7. That's kind of the and premiums are worth more. It's kind of that concept. And that's also why if you can find a a call or an option that
has more premium earlier in the day that you can sell into, you now have more more stuff, more value, uh more cushion to work with in order to then have it come down closer to zero. So that again is why I like to basically trade these
things in the first half of the day. And this is a good example as to why. All right, so we kind of come into common mistakes and then uh remember I'm going actually took today. So common mistakes as far as being directional that picking
a strike too far out of the money. Now you know you kind of look at this think oh it's cheap option that's great uh and if it goes that direction it'll expand a lot. I have found that there's kind of a sweet spot if you are going to be
picking out of the money options because you think that there's going to be a big move. Usually about $3 I think is about a sweet spot. you're not too far away, you don't have to spend a ton of money on it. And if it does work, they can
appreciate in value very quickly. Uh, of course, the closer into the money that you get, uh, the more that it's going to trade like one to one, more linear. Uh, it's going to cost you, how much risk you're going to put on, and and, um, all
of the premium when it really starts to move. So, there's a balance. Just don't go picking too far out. If you pick something for a dollar, it's a it's a small chance that it's going to work. You know, very slim. Okay. And then
materializes. Again, that goes back to anticipating something and you get it wrong, well, you're just probably going never happened. Okay? You really want to make sure the setup is there and that
you're actually getting the move right when it happens. Uh letting a profitable trade turn into a loser. This should be trading 101 for just about anybody. And this is um this is true for stock trading. Of course, it happens. It
I think we can do better when it comes into something like zero DT because when zerodt, you should know that you are trading a very quick move. And you should know that these things turn around and and lose value very quickly.
So, if you are in a trade that is going well, you know, make sure you cash in, get some profits, and then you don't want this thing to then turn around back break even if it's going to come back around. But what you don't want to do is
have a good move that is doing well like this, you know, doing pretty well, and like, "Oh, I think it's going to work around." But no, now now it's a loser. Now you are below your entry. You just
don't need to do that. So if you have a good trade, at least cut it break even into a loser. All right. And then as far as credit spreads, news shocks, and of know, if there's a news shock that you're you're long on something and it
Great. But when it comes to outofthe-oney credit spreads, news shocks can be especially problematic because remember, you've got this situation where you are potentially making 200, but you're risking 600. And
so if you get a news shock that you know all of a sudden blows past this uh you could see that you could be max loss very quickly. Once again this is why it's important to set a stop-loss. And if you don't set a stop loss then you
could you could be upside down in a trade pretty quickly. So again new shocks out of the money specifically and setting stops. Uh trying to get too much premium decay. Now this is another thing that I see. Let's um let's say you
that I see. Let's um let's say you managed to get $7 for credit as far as a coming down coming down and you're doing well. You're you're making money on this thing because it's depreciating in value. And let's say now you're down to
value. And let's say now you're down to $1. And so you've basically made 90% off there at max and you're like, well, you know, hey, I want that last 10%. I'm thing. Well, what I have found is generally speaking, anything below a
dollar, it's really hard to get that last dollar out of it because there's because, you know, there's still time. There's still time value. And to really squeeze out that last dollar, man, it's really got to go your way or just, you
that kind of stuff. And the risk is if the market comes down down and then day, you know, you can this thing will turn around on you very quickly. And that is not fun. You do not want that. And so I have just found in my
experience, get get 80%. You know, that's kind of the rule of thumb, 80%, you know, that's easy. But at least if you look at the premium, if you start getting anywhere near a dollar or below, just get out. Take your profit, walk
below a dollar is just going to be too hard to get. It's too risky. All right. selling when price is already extended. Now, this should be again kind of like price is going up, you don't want to buy when it's too extended or when price is
coming down, you don't want to sell when it's extended too far because, you know, you just kind of missed the turn and it's it's too far gone. Now, this is one of those things where if price is coming down and you are wanting to sell a call
credit spread because you think price is going to continue to move down. If it has already been moving down for quite some time, maybe it's getting a little stretched down here and you might actually get a bit of a bounce and here
you are selling a call credit spread and then this thing turns around on you. So, really, it's best to to get timing correct. This all kind of comes down to timing. It's day trading. It's important. And you don't really want to
do it when it's already kind of long in it, like already moving a lot in one kind of maybe doing this and it starts to turn. That is where you want to start don't want to be, you know, doing this and then putting it on here like this
credit spread down there. No, it's probably a little bit late because it could bounce on you and then now now it's going against you. Okay. So again, extended on the long side or too extended on the short side. All right.
Now, here is the live trade that we put on today. Uh, pretty easy, pretty I thought it was extended and unsupported. So, I thought the market was going to come down. So, what we did is this was a call credit spread. You
can see here uh that these are calls and you can even see here that this was a uh SPX0T DTE call credit spread. We sold the 6405. If we bought the 6425 for
protection, so this was a 20 wide call credit spread. We took in $4.30 as far as the credit. And basically, if you look at it here on the chart, this this visualized. This is where we sold it. So
$4.30. And then we bought it back down here for $1.70. If you look at that over here, $1.70, that was plus 60%. Now, this actually happened to be a pretty good day. in for the downside. In fact, the
market was pretty heavy and it never bounced back up. So, I could have continued to hold on to this and uh this would have made 100%. This definitely I sold a credit spread and I could have made 100%. But I still made only 60
because well that's what I wanted to do. That was my target and I made it in 1 That was my target and I made it in 1 hour from 7:00 to 750 I made 60% in an doing pretty well. Your account's going to be happy. Uh the next best thing I
could have done is maybe around 80% and then you know maybe 80% would have been down here. Call it good because now you have to wait for the rest of the day in time just to hang on to something that you know who knows what could happen to
the market. So get in, get out, get your percentages, call it good. And uh you know what, maybe if I left 20% on the table, no big deal. I got the bulk of it. Took me an hour. I'm happy with it. And we easy to move on. But yeah, this
is what this looks like. These are the alerts and these are the trades and this guys enjoy that. If you have any questions, leave them in the comments or teaching this kind of stuff, so I'd love to see you in there and let me know how
I can help. Thanks again, guys. See you later. Hey, TG here with Simpler Trading. Thanks for watching. If you enjoyed this video, be sure to leave a like or comment below. Also, make sure to subscribe and click that notification
bell so you can stay uptodate with my market analysis. Or you can join my free description. Good trading and I'll see you with the next