Abstract:

In recent years, trading zero days to expiration (0DTE) options has become increasingly popular, especially among retail traders looking to profit from short-term market movements. As a result of the increased interest, the volume of trading in 0 DTE index options has increased significantly, as well as their share of trading in index options with different expiration dates. One reason for the interest in options with short expiration dates is the opportunity to take advantage of the fact that options’ implied volatility (IV) is usually higher than the realized volatility. This provides a potential opportunity to make money on trades in which one takes a neutral position relative to changes in the price of the index (zero delta) in an effort to make money on the difference between implied and realized volatility. The article examines the effectiveness of the Iron Condor option strategy on SPX 0DTE options. Two variants of the Iron Condor strategy were tested using one-minute data of changes in index and option prices over the past 12 months. Both variants of the strategy proved profitable confirming the hypothesis that this type of trading can be profitable. The article confirmed the existence of the phenomenon of overstatement of implied volatility in the 0 DTE options market in relation to the actually realized volatility.