The Problem
Every few days, my feed shows the same screenshot: a 0DTE contract bought at $0.20 and sold at $8.00, captioned “turned $200 into $8,000 — zero-day options are how ordinary people get rich.”
The comment section is full of “teach me.” And every so often someone DMs me the same question: can zero-day options work as a long-term, consistently profitable strategy?
My answer is one line: Don’t ask whether it works. Ask what happened to the people who never posted.
My Thinking
I went through every hard dataset I could find. The conclusion is brutal but clear.
First dataset: academic research. After Cboe introduced daily expirations in May 2022, a widely cited paper (SSRN, “Retail Traders Love 0DTE Options… But Should They?”) tracked retail P&L: retail traders lose $350,000 a day, on average, trading 0DTE. The breakdown is the interesting part — buyers lose $8.05 per contract on average, sellers make $4.55 per contract after fees. The problem: retail overwhelmingly prefers to buy. The sellers’ thin positive edge gets drowned by the buyers’ large negative one.
Second dataset: exchange statistics. Cboe’s own report shows 0DTE volume grew five-fold in three years, averaging nearly 2 million contracts a day, with retail making up 50-60%. The report praises retail traders as “sophisticated and disciplined.” Discount that sentence heavily — the exchange earns fees on every trade. Of course it wants this game running forever.
Third dataset: backtests. SPX 0DTE backtests from 2023 to 2026, thousands of trades: buying ATM calls for direction wins about 28% of the time and loses 0.18R per trade on average; selling 10-delta spreads wins about 78% of the time but earns only 0.06R per trade.
Put the three together and the full picture emerges:
- Buying is a lottery ticket: 28% win rate, theta evaporating by the hour, the bid-ask spread eating double digits of your premium. A lottery ticket doesn’t become a salary just because you can buy one every day.
- Selling is a thin blade: winning 78% of days sounds beautiful. But the profit/loss ratio is inverted — the average loss is about 2.5x the average win. One fat-tail day gives back eight wins, plus interest. And that thin 0.06R edge? Commissions eat half of it.
The Insight
0DTE riches are survivorship bias at its purest. The only honest use of 0DTE options is as insurance, not as an investment.
The bias has three layers, each more subtle than the last:
Layer one: posting bias. Losses are 100% silent — what is there to post about going to zero? Gains are 5000% loud — you must post them. Tens of thousands of contracts quietly expire worthless every day; one lucky soul turning $200 into $8,000 is enough to flood your feed. You are not seeing the distribution of a strategy. You are seeing its loudest survivor.
Layer two: dropout bias. The blogger “earning $100 a day” selling 0DTE blows up on a volatility spike and stops posting. The algorithm quietly promotes the next blogger still inside their winning window. The sample purges its failures in real time; you only ever see the living.
Layer three: ecosystem incentives. While researching, I found a righteous-looking article titled “Retail loses $350K a day — Wall Street is taking your money.” Halfway through, I realized it was an ad for an e-book. Course sellers, subscription vendors, data-tool vendors, and the exchanges themselves — everyone in this industry makes money when you keep trading, and no one makes money when you make money.
One counterintuitive note: 0DTE sellers and my PMCC/Wheel system harvest the same thing — the variance risk premium. The difference is I play the 30-45 day “slow table” while 0DTE is a same-day “fast table.” Changing tables doesn’t change the game; it only changes how much faster the odds turn against you.
Practical Advice
- Ask three questions before believing any screenshot: How much capital? How many total trades? What’s the total P&L? Screenshots only answer “how much did this one win” — which happens to be the least important number.
- If you must trade 0DTE: sell only, defined-risk spreads only, position size under 1% of net worth, close same-day, never overnight — and run the commission math before entering. Many strategies cancel themselves once you do.
- The right way to use it: on FOMC, CPI, or earnings days, buy a cheap 0DTE protective put as one-day insurance for your holdings. Pay only for the time you need — the one use case Cboe and every serious study endorse.
- Keep “win rate” and “expectancy” separate: a 78% win rate is not an edge. +0.06R is, and it barely survives commissions. Next time you’re tempted, ask yourself — am I here to collect premiums, or to buy lottery tickets?
Trading Insights #006 · To be continued