0DTE Trading Rules

36 Pages Posted: 1 Dec 2023 Last revised: 16 Jan 2024

See all articles by Grigory Vilkov

Grigory Vilkov

Frankfurt School of Finance & Management

Date Written: December 6, 2023


This empirical study is the first in a series documenting empirical properties of 0DTE options on the S&P500 index (SPX) and popular strategies built from these options for the sample period from 09/2016 to January 11, 2024. We focus on strategies established every trading day and held to expiry (i.e., unconditional and static trading rules). 0DTEs deliver significant variance risk premium for the whole sample period. Realized returns of individual options are highly volatile and skewed, though at the median, buying deep in-the-money calls and selling out-the-money calls and puts can be statistically profitable. The realized return distribution of most strategies is extensive, rendering mean returns insignificant. The realized PNL of most strategies can be explained well by the realized skewness of the underlying index return, and its prediction is essential for building conditional trading rules.

Keywords: 0DTE, ultra-short options, variance risk premium, volatility trading, option strategies, option trading

JEL Classification: G11, G12, G13, G17

Suggested Citation

Vilkov, Grigory, 0DTE Trading Rules (December 6, 2023). Available at SSRN: https://ssrn.com/abstract=4641356 or http://dx.doi.org/10.2139/ssrn.4641356

Grigory Vilkov (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322

HOME PAGE: http://www.vilkov.net

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