[00:00] Zero DTE and one DTE. David Jaffe with beststockstrategy.com and in this video we're going to discuss my thoughts on zero DTE and one DTE. DTE stands for days to expiration. So if you
[00:14] sell something that is zero DTE that means that it expires the same day that you place the trade. So for example if you're trading SPX which is trading around 4,400 and you sold the zero DTE
[00:26] put option with a strike of 4,300, then as long as the S&P doesn't penetrate that 4,300 strike price, then at the end of the day, that 4,300 strike will expire worthless, and therefore you will keep
[00:39] the entire premium that you collected when you sold that option. In the past, I didn't like selling 0 and 1 DTE because I thought that it was more of a gimmick. However, with volatility recently trading at three and a half year lows, where I think the VIX even was trading at around
[00:54] recently During those times if you want to sell premium you definitely don want to extend your durations out Now on the flip side I do understand where it like okay if volatility is low you can necessarily sell something that has a one or two week DTE because you not going to collect much premium for doing so So as a result you probably gonna find yourself
[01:14] going out like 45 or 60 days. But the problem with that is that the VIX trading at 12 and a half is extremely low. And it really only takes a few trading days for it to spike up to about 25.
[01:26] So because volatility is one of the major components of option pricing, if you sell an option the VIX is trading at 12 and a half and then two or three days later the VIX is currently trading at 20 then all of the options that you sold when volatility was really low are going to be showing
[01:41] you a major loss that's why during periods of low volatility i definitely think it's important to trade vertical credit spreads because by trading vertical credit spreads it neutralizes the volatility component of that option trade and therefore you're not going to be hurt as much
[01:57] if volatility spikes up. However, one of the major things that I've been doing is by trading zero and one DTE options on SPX, I've been able to collect around one to $2,000 every single week.
[02:09] And it also very low stress because the strikes that I choose are very far out of the money and it just a great way to collect premium while you wait for volatility to increase Now if you are interested
[02:22] in zero and one DTE options trading then you can take the seven-day trial of the large account trade alerts. It's available at beststockstrategy.com slash memberships. Additionally one of the major components of this trading strategy is you definitely have to call up your broker and make
[02:39] sure that you negotiate a very good commission because especially when trading SPX, oftentimes they can charge you around two to three dollars for every single contract, especially with a broker like TastyTrade. They charge so much money in commissions that it makes zero and one DTE
[02:55] options trading very untenable and extremely difficult. TastyTrade basically charges about 10 times more than I pay with E-Trade. The other thing is that it's really important, especially if you're going to be using SPX that you're trading with portfolio margin as opposed to
[03:11] regulation T. Additionally, SPX has the added benefit of being a 1256 cash settled contract. So as a result for tax purposes it going to be treated much more favorably than if you trading a short stock or even an index Now I do understand that SPY it in that gray area
[03:30] So oftentimes some accountants will tell you that you can submit it to the IRS as a 1256 contract, but you will have a higher propensity to get audited because it's possible that if you're trading SPY and you're claiming it as a 1256 cash settled security, then the IRS might reject that.
[03:47] You can also trade SPY using zero and one DTE. So if you want to do that, that's totally fine. But just recognize that because SPY is 10% of SPX, then you're definitely going to have to
[03:59] talk to your broker and make sure that you negotiate your commissions down. David Jaffe with beststockstrategy.com. Visit Best Stock Strategy, enter in your email address and receive over $400 of valuable free trading. You can also enroll in the options trade alerts. There is a
[04:14] large account and a small account option trade alerts. The option trade alerts for the small accounts are available now for under $100 a month. So feel free to check that out if it doesn't exceed your expectations and you can easily cancel. It's only $19 for seven days. And if
[04:28] you have any questions, then leave a comment below.