3 Option Strategies

✅ 1. 0-DTE Iron Fly (ATM Iron Butterfly)

The 0-DTE Iron Fly — selling an at-the-money straddle and buying wings for protection — is the most powerful theta-harvesting strategy in same-day options trading. Its core edge derives from the extraordinary rate of time decay at the money. ATM options experience the fastest gamma and theta changes, and within hours of expiration, their value collapses dramatically if price remains relatively stable.

An iron fly sells both the ATM call and ATM put, while purchasing further OTM wings to cap risk. This creates a defined-risk straddle, turning unlimited risk into a predictable maximum loss. Because you are collecting the highest premium on the chain (the ATM options), this strategy often yields 3–20× more credit than bull put spreads.

Professionals use iron flies on days where the market is expected to consolidate, remain rangebound, or collapse in implied volatility. The setup excels after large overnight moves, strong gap opens, or major news the previous day. These conditions often produce morning chop followed by volatility compression — the exact environment that crushes ATM premiums.

Key Greek behavior defines this strategy’s edge. The position is delta-neutral, vega-negative, and theta-maximizing. A neutral delta means you’re not betting directionally — any sideways action generates rapid profit. The negative vega means falling IV immediately boosts your P&L, and the extraordinarily high theta means the position decays in your favor every minute, especially after 11 AM ET.

However, gamma is the double-edged sword. ATM options have the highest gamma, meaning price moving too far too fast can rapidly eat into the credit and even create maximum loss conditions. For this reason, institutional traders manage iron flies aggressively using time-based exits, gamma stops, and dynamic hedging using micro futures (MES, ES, or SPX futures). They often hedge intraday with small futures positions to flatten delta.

A well-built iron fly has wings positioned at 15–30 delta, balancing risk and credit. The payoff is largest when price finishes near the ATM strike. Closing early—especially when you’ve captured 40–70% of the total credit—is standard practice. The trade is almost always exited before 2:00 PM ET to avoid the “gamma death zone,” where even minor price moves cause large swings.

Iron flies are best for traders with mechanical discipline, strong understanding of intraday volatility patterns, and the ability to manage delta quickly. When executed correctly in calm or mean-reverting markets, the iron fly is the most profitable theta-capture strategy in the entire 0-DTE universe.

• Why it’s the best?
  
• Highest theta concentration (ATM options decay the fastest).
  
• Very tight structure → excellent gamma control.
  
• Collects huge premium → offsets intraday noise.
  
• You can define risk precisely.
  
  
• When to use?
  
• Low–moderate volatility mornings
  
• Rangebound price action
  
• Strong liquidity in SPX, narrow bid–ask
  
  
• Typical setup:
  
• Sell ATM call + ATM put
  
• Buy wings ±15–30 points
  
• Hold 1–2 hours, manage delta
  
  
• Stats:
  
• Win rate often 60–75%
  
• Avg R:R 1:0.6 to 1:0.8
  
• Excellent for consistency
  

✅ 2. 0-DTE Bull Put Spread (BPS)

The Bull Put Spread is the highest-probability and most stable 0-DTE income strategy used by SPX and XSP premium sellers. It involves selling a put that is out of the money and simultaneously buying another put further OTM to define risk. Its primary advantage lies in its exposure to positive theta, negative vega, and controlled gamma, making it ideal for days with orderly price action or bullish-to-neutral drift.

The core principle behind the bull put spread is simple: markets typically spend more time drifting upward or sideways than collapsing. 0-DTE options lose value extremely fast, particularly out-of-the-money options. By selling a 22–26 delta put and buying a 15–17 delta put, you position yourself in the zone where time decay works aggressively in your favor, and where IV crush after the open exponentially increases your probability of profit.

Professional traders rely on several metrics to select the correct strikes. First, the delta ratio between the short and long legs should be between 1.45–1.70. This ensures you're collecting enough premium for the risk while keeping gamma manageable. Next, the short-leg gamma must remain below threshold (0.045 for XSP, 0.015 for SPX), preventing sudden P&L swings late in the session. You also want net vega negative, so falling implied volatility benefits your trade, and net theta positive, so time decay improves your position.

Volume profile, expected move, skew, and opening volatility conditions guide entry timing. The best window tends to be 9:50–10:20 AM ET, after the initial volatility shock has normalized. Avoid entering during major macro events (CPI, FOMC, NFP), as volatility expansion can instantly destroy the probability structure.

You profit if price stays above your short put strike at expiration. Even if price moves downward slightly, the speed of decay can still allow you to win. Risk is strictly defined by the width of the spread, typically 3–5 points in XSP and 30–50 points in SPX. This creates a predictable maximum loss and controlled exposure.

Profit-taking is straightforward: close the spread when it's worth 5 cents or less, or when you’ve captured 70–90% of max profit. Stop out if the spread doubles in value relative to your credit (e.g., enter for $0.30, stop at $0.60). Always exit entirely by 3:32 PM ET to avoid gamma slingshot behavior.

Overall, the bull put spread is the most consistent 0-DTE strategy, with typical win rates between 75–90%, depending on strike selection. It is ideal for traders looking for systematic, repeatable edge without needing to predict market direction — only that markets won’t collapse that day.

• Why it works?
  
• Markets drift upward intraday statistically.
  
• Keeps positive theta + directional bias.
  
  
• When to use?
  
• ES/NQ bullish open
  
• SPX trending strong
  
• VIX < 17
  
• Breadth strong (AD line positive)
  
  
• Typical setup:
  
• Short put at 5–15 delta
  
• Long put 20–30 points lower
  
• Risk-defined, easy to automate
  
  
• Stats:
  
• Win rate 80–90% in bullish days
  
• Low stress
  
• Great for small accounts
  

✅ 3. 0-DTE Broken Wing Butterfly (BWB)

The Broken Wing Butterfly is the most advanced and nuanced 0-DTE strategy, offering asymmetric risk, low cost, and powerful edge during high-volatility or directional days. A BWB is essentially a skewed iron fly or skewed butterfly where one wing is placed further away, creating a structure with higher reward than risk or even a no-debit or credit-based butterfly.

A typical bullish BWB sells two ATM or slightly OTM puts, buys a closer lower put, and buys a further lower put several strikes away. This creates a payoff profile where the middle strike yields the highest profit, but losing scenarios are heavily controlled. The beauty of the BWB is that you can collect credit while still having a buffer zone and minimizing tail risk.

Unlike the bull put spread or iron fly, the broken wing butterfly shines in volatile markets. It's designed to handle one-directional moves, strong intraday drops, or large opens. When skew is elevated — especially put skew — the far-out wing becomes cheap, allowing you to build the structure for little or no cost. This skew is what gives BWBs institutional appeal: they exploit uneven pricing in the options chain created by market fear.

Key features include moderate gamma, moderate theta, and mildly negative vega. Although not as theta-rich as iron flies or as high-probability as bull put spreads, BWBs offer something neither of those provide: asymmetric opportunity. You risk less than you can make, while still benefiting from IV crush and directional drift.

Professionals place BWBs based on expected move, skew, and opening momentum. A bullish BWB is ideal when price is expected to drift upward or when volatility is high enough that selling ATM premium is too dangerous. It provides better tail risk management than credit spreads and avoids the unlimited risk of naked options.

Management rules revolve around maintaining delta, controlling gamma, and monitoring whether price migrates toward the tent peak. Traders often take profits early if price stalls near the short strike or begins to threaten the near wing. If price collapses rapidly, a BWB tends to hold up far better than a credit spread, because the long wing absorbs much of the gamma and Vega shock.

The BWB becomes exceptionally powerful when structured for zero debit, creating a free “lottery ticket” with hedged downside. Many traders use multiples—layering BWBs at different levels—to build a volatility-weighted directional profile.

In high volatility, trending, or one-directional markets, the broken wing butterfly is the best risk-adjusted strategy, offering safety, optionality, and strong skew exploitation.

• Why this is sleeper-OP?
  
• Collects more credit than risk (asymmetry).
  
• Handles violent intraday moves better than iron fly.
  
• Still benefits from fast theta burn.
  
  
• When to use?
  
• VIX severe > 20
  
• ES/NQ whipsaw
  
• FOMC days, CPI, NFP
  
• Big macro catalyst days
  
  
• Typical setup:
  
• Sell ATM short strikes
  
• One wing close
  
• One wing far out
  
• Net credit > max loss
  
  
• Stats:
  
• Win rate 50–70%
  
• Best for tail-risk adjusted returns.
  

⭐ Which one is best overall?
If you want consistency:

→ 0-DTE Iron Fly

If you want safest risk-defined trending play:

→ 0-DTE Bull Put Spread

If you want best payout on volatile days:

→ 0-DTE Broken Wing Butterfly