Liz and Jenny Tested 1DTE Put Spreads Every Day of the Week. Only One Day Actually Works.

Key Concepts

• Zero DTE (Days to Expiration): Options contracts that expire on the same day they are traded.
• One DTE: Options contracts that expire the following trading day, often used to avoid Pattern Day Trading (PDT) rules.
• Pattern Day Trading (PDT) Rule: A regulatory constraint requiring traders with accounts under $25,000 to limit the number of day trades they execute in a rolling five-day period.
• Expected Move: A statistical calculation of the range an underlying asset is expected to trade within over a specific timeframe, based on implied volatility.
• Short Put Vertical: An options strategy involving selling a put at a specific strike price and buying a put at a lower strike price to define risk.
• Overnight Risk: The exposure to market volatility and price gaps that occur while the market is closed.

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1. Study Methodology and Framework

The study analyzed three years of SPX (S&P 500 Index) options data, specifically comparing the performance of "Zero DTE" strategies (executed at the open) against "One DTE" strategies (executed 15 minutes before the market close).

• Data Scope: Three years of 10-minute interval data, representing the entire lifespan of daily SPX options.
• Strategy: Selling short put verticals with varying widths ($10, $20, and $30 wide).
• Exit Criteria: Trades were managed by closing winners at either 25% or 50% of the maximum profit, while losers were held through the expiration day.
• Objective: To determine if the additional time value (premium) collected by holding overnight justifies the inherent risks of being exposed to market gaps.

2. Performance Findings

The study yielded distinct results based on the day of the week and the strategy employed:

• Monday–Thursday Overnight: The study concluded that selling one-day-to-expiration put spreads at the end of the day from Monday through Thursday did not work. The negative P&L per trade indicated that the extra credit received did not compensate for the overnight risk.
• Friday Overnight (The Exception): Selling Monday-expiration put spreads on Friday afternoon proved profitable. The study showed positive results across all tested wing widths ($10, $20, and $30) and profit targets (25% and 50%).
• Reasoning: The success of Friday trades is attributed to the "weekend risk" premium and a historical tendency for the market to open with a "tailwind" (upward bias) on Monday mornings.

3. Key Arguments and Perspectives

• The "Whistling Dixie" Philosophy: The hosts emphasize that the primary appeal of Zero DTE trading is the ability to close all positions by 3:00 PM (CT), allowing traders to be "free and clear" of market risk overnight.
• PDT Mitigation: While the PDT rule is reportedly being reviewed for potential changes, the One DTE strategy is currently presented as a viable workaround for smaller accounts to avoid day-trading restrictions.
• Risk Management: The hosts argue against "loading up" on overnight positions. Even for the profitable Friday strategy, they suggest "dabbing" or scaling in slowly rather than replacing core equity positions with overnight options.

4. Notable Quotes

• "The extra credit from selling the night before was not enough to compensate for overnight exposure. Positions that moved against us had no opportunity for adjustment while the market was closed." — Synthesis of study findings.
• "The whole point of a lot of these zero DTEs... is to have nothing on at 3:00 p.m. when the bell rings. You're free and clear." — Liz, on the psychological benefit of intraday trading.

5. Synthesis and Conclusion

The research demonstrates that while traders often seek to extend their market participation via One DTE strategies to avoid PDT rules or capture more premium, the overnight risk is generally not compensated for during the standard work week (Monday–Thursday). The market's tendency to gap or move against positions during closed hours negates the benefit of the extra time value.

Main Takeaway: Traders should prioritize intraday Zero DTE strategies to maintain risk control. The only statistically supported exception is selling Monday-expiration spreads on Friday afternoons, which benefits from weekend volatility premiums and a historical Monday morning upward bias. Traders are advised to approach these overnight positions with caution and limited capital allocation.