Have you ever wondered how to turn a profit from 0DTE option trading? 0DTE options, or zero-day trades, allow traders to buy and sell within the last 24 hours of a stock, ETF, or index’s life. Thanks to their return potential, they’re growing ever-popular, but how do you start trading 0DTE through your own broker?
In this guide, we explore:
- Why 0DTE options are popular with traders
- What you need to start trading 0DTEs
- A step-by-step guide to trading these options in practice
- The risks behind 0DTE trading
What are 0DTE options?
0DTE stands for “zero days to expiry,” referring to stock, index and ETF options with less than 24 hours left to trade.
0DTE options enable traders to invest in and sell underlying assets during their final few hours on the market. For some traders, it’s an appealing way to make money, albeit at a high risk of financial loss.
0DTE options don’t necessarily start and end on the same day. In some cases, the assets they’re attached to have been on the market for weeks or months. What changes is that they’re in the last 24 hours of trading, which can make selling more lucrative but altogether more intense.
What do I need to start trading options?
To start trading in 0DTE options, you need a brokerage trading account. To sign up at a brokerage firm or via an app, they will likely need to know your:
- Name and personal identification details (such as a passport or driving licence)
- Date of birth
- Financial status
- Financial needs (including liquidity)
- Tax status
- Trading experience details
- Income and employment status
- Job title
- Social security number
- Risk tolerance
- Full address
Many brokerages are also likely to want to know about your experience with options. They want to assess how risky it is for them to take you on as a trading customer.
How to trade 0DTE options: step by step
Before trading 0DTE options, read our day trading for beginners guide for all the background you’ll need to start.
Be sure to read our introduction to 0DTE options for more information on how they work in practice.
Once you’re ready, here are the steps you need to take.
1. Choose a broker
Make sure to choose a broker specialising in options online with a firm reputation. For example, consider signing up with services such as Webull or E*TRADE, which offer 0DTE.
When choosing the right broker or brokerage for your options trading, make sure to consider their:
- Fees and pricing
- Order execution speed
- Security standards
- Trader reviews
- Customer care options
- Trading platform apps and setup
Don’t leap into the first 0DTE options broker that appeals to you. Be sure to compare three or four different options, for example, and take your time to decide.
2. Register and sign up
The sign-up process will vary between different brokers and service providers. As mentioned above, there are a few details you’ll need to provide to a broker before you can start trading.
Moreover, you might not be able to start trading in 0DTEs immediately. Some brokers might have tiers available for new traders, meaning you must be a registered patron for some time before using such options.
Beyond this, be prepared for a broker to test your knowledge of options trading and your attitude to risk. Given that 0DTEs can be volatile, and risks are higher given the closeness to expiry, brokers want to know their traders are the “real deal”, and they know how to monitor options effectively.
3. Add funds to your account
To start trading with any broker, you must fund your wallet or account with a card or bank transfer. Options will vary between different services, so be prepared to be flexible.
Ideally, you should pay more than the “default” or “minimum” amount to start day trading. For example, look at the broker’s margin demands and read their minimum balance terms. It pays to read the broker’s fine print carefully and stay on their good side.
4. Look for options
Once registered, you can look for 0DTE options via your chosen platform. As 0DTEs are high-risk, it pays to set up a clear entry and exit strategy to avoid mass financial loss. As with other underlying asset trades, it pays to look before you leap.
You can filter index, stock, and ETF end-times, but be careful to account for time decay and volatility. You could also limit risk by leaning into buying rather than selling strategies while you get used to the process.
The risks in trading 0DTE options
As 0DTE options require traders to buy and sell very close to the expiry dates of stocks and indexes, there’s little chance of a dip rebounding within such a tight timeframe.
Time decay, as mentioned, is also a significant risk factor for 0DTE traders. It means the price of an option may continue to decline as expiry gets closer. However, buyers look for 0DTEs because there’s a chance underlying assets will increase in value to balance out the decay effectively.
Ultimately, 0DTE option strategies risk large losses for traders without a clear strategy in mind – they are not for the faint-hearted.
Is 0DTE trading easy to get into?
While it’s easy to start 0DTE trading and to see why people find it so lucrative, there are always significant risks involved.
Always choose a reputable broker, follow their funding rules, and build your strategy to enter and exit the market to limit loss. Remember, too – that this is by no means a get-rich-quick scheme.
Conclusion
0DTE options are growing in popularity and offer an appealing intense way to trade, albeit with a high risk of financial loss. Thorough preparation is essential when going into 0DTE trading, and by finding a good broker and deciding on a strategy, getting into 0DTE trading can be an engaging new trading opportunity.
FAQs
Zero-day options, or 0DTEs, are popular because they let traders buy and sell, potentially at lucrative prices, just hours before expiry. They have a higher frequency of opportunity and greater leverage, which is popular with investors.
0DTE options can be profitable if underlying asset values outweigh the time decay affecting the overlaying price. However, they carry a high risk of loss.
There are no guaranteed strategies that work best when trading on 0DTE options. However, many traders lean into buying strategies (such as scalping).
