Zero DTE Strategy That Makes Money Even When You're Wrong

[00:00] zero DTE strategy that I use. It makes me money even when I'm wrong. I was completely wrong today on a trade. Completely wrong. But it still ended up making me $280 in profit today. Even Yeah. So, let me break down the trade

[00:17] for you exactly how the strategy works, what it is, how to execute it, what take profit and stoploss levels I use, what criteria I use to enter the trade, exit the trade, and as well as, you know, how to actually execute the trade within the

[00:31] Robin Hood platform. Okay, step by step. So, keep watching. I think this is going to be a fun one. So, this particular trade that I did today, it was on the S&P 500 ETF, SPY. The market opened up negative. It was a it was a red day. It

[00:45] was, you know, just the way things have been nowadays, right? And the market continued to go down, down, down, down, down, down, down about an hour after the market had been open. It was right around 9:25 Central Standard Time. So,

[00:59] Algo Premium, link in the bio in the description for you guys to check it out, showed the spy very, very oversold. I'm like, cool. So, the market rarely

[01:12] goes down, you know, more than 4% in a day. And at this point, it was already down 2%. So, I was going to do a what's called a credit spread. Put credit spread to be specific. And basically, what that means is you select a strike

[01:26] price for an option and you just don't want that price to get to that point. You just want it to stay above it. Okay? So, I posted this trade when I got into it this morning right in my Patreon. And if you guys aren't members of my

[01:41] content. And then if you guys want to see exactly what I'm trading, when I'm this way, you can see what I'm trading live. So, I went ahead and posted this

[01:54] as soon as I opened this trade up. So, today's expiration date 42125. I sold the 506 put and I bought the 504 put. So that that $2 difference, that's my risk.

[02:07] Okay. And for that, I was I collected 11 cents a contract. But what that means it's it's actually $11 a contract because each contract controls 100 shares. I collected a decent amount. For take profit, and this is where you guys

[02:21] need to take some notes, for take profit, I use I'm good with taking profit of 50% of the premium collected on the zero DTE, especially for these kind of trades. or I'll do a stop loss at 100% of the credit that I received.

[02:35] So that's why my stop loss was at 22 cents and I was just going to wait and see to see what happened because with credit spreads the beautiful thing is as the day goes on especially with zero DTE theta with a which is time decay when

[02:48] that kicks in the options start losing value as the day goes on which as an option seller especially when you're selling a credit spread it works in your favor because as the options lose value you're realizing a profit from the

[03:03] credit that you received. and you can buy it back at a cheaper price. So, I'm like, "All right, cool. This seems like a good spot." And then, you know, 10 Right? So, I'm just going to let it continue to play out. And then, bam,

[03:19] down, right? It just kept going down, down, down, down, down, and then went up again, down, down, down, down, down. So, I was just like, crap, this shouldn't be happening. But again, as traders, the only thing we can do is ma manage our

[03:35] risk. We cannot control what direction the market's going to go and no one can predict that stuff. That's why I like selling credit spreads on the zero DTE because I put in the level and then I just sit and wait. And if the market

[03:48] fluctuates, if it stays flat, I make money. If it goes up, I make money. Even if it goes down, I make money as long as it doesn't hit my strike price. So for this trade, as you can see, my strike price, my short strike price was 506. So

[04:02] let's mark it down over here. Horizontal line 506. Okay, right around here. So even though I got into this trade on this candle, I had a lot of cushion cuz this was at 5 5:15, right? Almost 516 when I got into the trade and it needed

[04:18] to go down another 10 points in the same day, even though it had gone down 10 points already since the last close. So, I still had a huge cushion. I make money as long as by the end of the day, it is above 506 and I can take my profit

[04:32] whenever I want by buying it back at a cheaper price. I got out of this trade right here. Okay, cuz this is when it went above my 50% takerit. Could I have going to happen. And this was only about 40 minutes before the market was about

[04:50] there's a lot of price movement. So that's why I got in I got out of that trade. I posted about it in my Patreon as well that I got out of it at with a

[05:04] 63% of the premium that I had collected. So it still made me $380 even though I was completely wrong. This is where I entered the trade. This is where I got out. Okay, spy was down quite a bit. And when I got out the price for spy was at

[05:20] 510. It was at 510. So it had gone down five points from when I got into the trade expecting it to go up but it went down and even though it went down I still made this profit. Why? Time decay data is beautiful. As an option seller

[05:34] that's where I get my consistent gains. I am the casino. I am not the gambler. Okay. So I will take on that risk and I will just let the time play out in my favor as the day goes on. Now how to step byep execute a trade like that.

[05:49] Right? So I'll show you guys an example. So, for instance, if I wanted to do this trade tomorrow, which is April 22nd, right? So, once I open up the option chain for the spy, let's see where we are. So, when we go into the puts, this

[06:03] money when we're selling puts because we want to collect that premium. Okay? So, I'm going to do put sell. And this is where I picked my strike price. So, what

[06:15] I did was I picked a 10 delta which gave me a 90% chance of profit on that trade because this is for tomorrow because today the markets market just closed and

[06:29] the data for today is gone, right? So, just just a guide. Again, don't do any an example of how to actually execute the trade. So, put first thing you're

[06:41] going to do is sell. That's where you collect the premium and then for protection because if you did this per contract your max loss would be $49,000. I'm like, "Yeah, no thank you for to make $50." So what I do is I go down two

[06:54] strikes. So if I sold the 500, I would buy the $498 and then again put. Now you're buying $498. And now this is what happens. Now, my risk went down from

[07:08] $49,000 to $185, and I'm collecting $15 in premium per contract. Now, you might be thinking, "Oh my god, that's a lot of risk to take on for such a little amount of money." That's why you have take

[07:21] profits and stop-loss levels. Just because that's what it says as a max loss doesn't mean that's the max loss you will take if you stay disciplined. So, for instance, if my max profit is $16, if I'm collecting $16 in credit, I

[07:35] would put a stop loss at $32 where I'm losing 100% of whatever I'm collecting. You're like, okay, that doesn't make sense, right? Because why would you want to lose 100% and make only 50% in profit? Let's look into that. Let's do

[07:48] some math now to break it down. If I'm doing a trade, say for instance, and let's let's use flat numbers so it's a little easier to understand and make sense. Let's let's say I have a 90% chance of winning a trade because that's

[08:00] we're doing high probability trades and we're setting up our risk and we're setting up our reward. So if I win a trade, I make $50. If I lose a trade, I lose $100. And my probability of success is 90%. If I win $50 nine times and I

[08:19] lose minus $100 once over those 10 trades, I'm still up $350. Would that make sense?