0DTE Options Trading Strategy: Profit Targets, Win Rate & Risk

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Generated Jan 15, 2026 at 12:07 PM
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25 insights
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Here is a chronological list of topics, claims, and statements from the transcript:
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A two-year back test indicates that holding zero-day trades to expiration may not capture the most profit. Taking 10-20% profit is suggested as a way to avoid tail risk in fast-moving markets.
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The current discussion is part two of a "best of" series on zero-day content, specifically focusing on tuning zero-day profit targets. The original content for this segment was from June 12th, 2025.
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Fine-tuning the trading approach can significantly impact performance in fast-moving, high-risk zero-day trades. A study was conducted to examine how different aggressive profit targets affect outcomes.
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The study involved zero-day trades initiated at 9:00 a.m. (30 minutes after market open, +/- 5 minutes) each day. Strategies included 20-point wide iron condors using 40 and 20 delta strikes, $10 wide iron flies, and iron condors with 40 and 20 delta shorts.
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In the study, winning trades were closed aggressively at 10%, 20%, or 25% of the maximum profit. Losing trades were allowed to run until the end of the day.
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Aggressive management, characterized by taking quick profits, resulted in good mean P&L for iron fly trades. Conversely, no management exposed these trades to substantial tail risk, often leading to maximum losses due to wider return deviations.
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Managing trades early reduces the variance and deviation of P&L, leading to more consistent trading positions overall. For iron flies, the CVAR (Conditional Value at Risk) remained similar across different management styles due to their inherently limited maximum loss.
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A 10-20% profit target range is considered a common and effective "wheelhouse" for these trades. When successful, trades can resolve quickly (10-30 minutes), but if initially unfavorable, they may take around two hours to recover.
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Optimal conditions for these trading strategies are found when volatility is high. The current market environment is characterized by extremely low volatility.
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For 40 delta iron condors with $20 wings, a lack of management or targeting very aggressive profits (75-90%) leads to numerous maximum losses. This negatively skews the mean P&L and underscores the necessity of active trade management.
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The strategy of progressively increasing trade size (e.g., Martingale doubling 2, 4, 8, 16, 32) is considered unsound. This approach contradicts proper size management, especially with large products and short timeframes, similar to a roulette strategy where capital can be depleted before a desired outcome.
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Selling zero-day XBX premium has been highly profitable over the last two years, particularly for traders who secure profits quickly. The key objective of trade management is to minimize tail losses, rather than regretting potential unrealized profits.
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No single profit target is universally best, but taking some form of action or management is considered optimal. Lower profit targets (e.g., 10%) result in tighter P&L deviations, and targets between 10-30% are generally justifiable on a daily basis.
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A 10% profit target produced the highest win rates and strongest performance, leading to 90% of trades being winners for Iron Flies. For Iron Flies, accepting a lower win rate to capture more credit resulted in better overall performance due to their lower nominal loss potential.
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Out-of-the-money trades require more aggressive management. At-the-money trades are described as more of an "all or nothing" scenario.
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A new study from October, titled "Impatient Bulls Selling Zero DT Put Spreads," analyzes different approaches to selling daily zero-day S&P put spreads, focusing on directional stances during market rallies.
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The put spread study involved selling one put spread daily using at-the-money short strikes, comparing multiple long strike widths. Entry times tested were market open (within 5 minutes) and 9:00 a.m., with trades closed at 10% or 25% of maximum profit.
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The two-year period covered by the put spread study was significantly skewed bullish, which is an important context for understanding the resulting data.
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For put spreads entered at market open and closed at 25% profit, win rates were very high, exceeding the expected 60-70% for at-the-money spreads. These high win rates reflect the generally upward market trend during the study period, and management also contributed to increased win rates.
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The study found no meaningful difference in performance between entering put spreads at market open versus 9:00 a.m. There is no single "perfect" entry time, perfect delta, or optimal trade strategy.
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Hyperfocusing on the best entry point is less important than understanding trade management and risk. The numbers for both entry times (market open and 9:00 a.m.) were essentially the same.
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The S&P rose significantly (from 3,800 to 6,600) during the study period, representing a strong upside market move. Any backtest data from this period should be interpreted cautiously, as it represents hindsight and may not predict future market behavior.
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Higher profit targets lead to greater total P&L but also increase exposure to larger drawdowns. This illustrates the fundamental principle of increased risk for increased reward.
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The bullish market conditions over the past two years could make selling put spreads appear like a "free money glitch." However, this perception does not account for the inherent risks involved.
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