Josh King Madrid · 0DTE Reference Guide
Options Deep Dive
Every strategy, every Greek, every concept — built for a 0DTE SPY/QQQ scalper who needs a definitive reference, not a textbook.
Live Trade Breakdown
My April 7th Trades — Analyzed
Contract-by-Contract Breakdown
TradingView backtest run directly on the 1-minute options price chart (not the underlying QQQ). 5 contracts per signal.
| Contract | Type | Trades | Wins | Losses | Win Rate | Total P&L |
|---|---|---|---|---|---|---|
| QQQ 260407C586.0 | CALL $586 | 3,488 | 2,712 | 107 | 96.2% | $294,822 |
| QQQ 260407C588.0 | CALL $588 | 1,791 | 1,374 | 44 | 96.9% | $222,036 |
| QQQ 260407C589.0 | CALL $589 | 1,097 | 816 | 41 | 95.2% | $163,877 |
| QQQ 260407P588.0 | PUT $588 | 900 | 838 | 15 | 98.3% | $87,215 |
| QQQ 260407P589.0 | PUT $589 | 396 | 379 | 6 | 98.5% | $50,405 |
| TOTAL | 7,672 | 6,119 | 213 | 96.6% | $818,355 | |
What Each Contract Means
Reading a QQQ 0DTE ticker like QQQ 260407C586.0:
- QQQ — Underlying asset (Invesco QQQ ETF tracking Nasdaq-100).
- 260407 — Expiration date: April 7, 2026 (YYMMDD format). This is the 0DTE — expires today.
- C / P — Call or Put.
- 586.0 / 588.0 / 589.0 — Strike price in dollars. These are ATM or 1–2 strikes OTM depending on where QQQ was trading at entry time, giving maximum Gamma exposure.
The strategy ran both CALLS (profiting on upside moves) and PUTS (profiting on downside moves) simultaneously, capturing momentum in both directions throughout the volatile session.
The Strategy Engine: 369NikolaiTesla Code (/369NTC)
This is a Momentum Scalp with Staged Exit — buying directional options (Long Call or Long Put) and exiting in three tiers. It is NOT a spread. Every trade is a pure directional long option position.
Why ALMA? — Moving Average Comparison
The strategy has a dropdown to switch between 5 MA types. Here's why ALMA(2) was chosen:
ALMA(Period=2, Offset=0.85, Sigma=5) — Period=2 means it only looks at the last 2 candles. This makes it the most aggressive, fastest-reacting MA possible. It fires on every micro-move, which is why the trade count is so high (7,672 trades in one session).
The 3-Tier Exit System
The strategy exits in three stages, with the overwhelming majority of the position held for the full 2% target. This structure ensures you're never "stopped out" of a winner early while still protecting capital on losers.
Why Is the Win Rate 96.6%?
- ALMA(2) fires on micro-momentum: With only a 2-candle lookback, the signal fires the instant price starts moving. You're entering at the very beginning of a micro-trend, not chasing it.
- Tight 0.5% stop loss: On a high-volatility day like April 7th, options move 5–20% in minutes. A 0.5% stop is hit only on genuine reversals, not noise.
- Options amplify small moves: A 0.3% move in QQQ can translate to 5–15% in an ATM 0DTE option due to Gamma. The 2% TP3 target on the option corresponds to a tiny move in the underlying.
- April 7th volatility: Tariff news created massive, sustained directional moves. Momentum signals on a trending day have much higher follow-through than on a choppy day.
- Backtest context: These results are from a TradingView backtest on the options price chart itself. Real-world execution would include slippage, bid/ask spread costs, and broker latency — all of which would reduce but not eliminate the edge.
Section 1
Options Fundamentals
An options contract gives the buyer the right, but not the obligation, to buy or sell 100 shares of an underlying asset at a specific price (the strike) on or before a specific date (expiration). The seller of the option takes the other side of that obligation in exchange for receiving the premium upfront.
Call vs. Put — The Two Basic Types
CALL Option
Right to BUY 100 shares at the strike price. You profit when the stock goes UP. Max loss = premium paid. Upside is theoretically unlimited.
PUT Option
Right to SELL 100 shares at the strike price. You profit when the stock goes DOWN. Max loss = premium paid. Upside is large (stock can go to zero).
Key Terms
| Term | Definition | Example (SPY @ $500) |
|---|---|---|
| Strike Price | The agreed price to buy/sell the underlying. | SPY $500 Call = right to buy at $500. |
| Expiration Date | Date the contract becomes void. 0DTE = expires today. | April 7, 2026 expiry. |
| Premium | The price you pay (or collect) for the option. Multiply by 100 for contract cost. | $2.50 premium = $250 per contract. |
| Underlying | The asset the option is based on. | SPY, QQQ, AAPL, etc. |
Moneyness — ITM, ATM, OTM
| Status | Call Condition | Put Condition | Characteristics |
|---|---|---|---|
| ITM In-the-Money | Stock Price > Strike | Stock Price < Strike | Has intrinsic value. Higher premium. Moves more like stock (high Delta). |
| ATM At-the-Money | Stock ≈ Strike | Stock ≈ Strike | Highest Gamma and extrinsic value. Most responsive to price moves. 0DTE scalper's sweet spot. |
| OTM Out-of-the-Money | Stock Price < Strike | Stock Price > Strike | No intrinsic value — pure time/volatility premium. Cheaper but needs bigger move to profit. |
Intrinsic Value vs. Extrinsic (Time) Value
Intrinsic Value = the real, immediate value if exercised right now. A $500 Call with stock at $505 has $5 of intrinsic value.
Extrinsic Value = the premium paid for time remaining and implied volatility. This is what Theta erodes every day. At expiration, extrinsic value goes to exactly zero.
American vs. European Style
- American Style (SPY, QQQ, most equity options): Can be exercised at any time before expiration. Most 0DTE traders never exercise — they just sell the option back.
- European Style (SPX, XSP): Can only be exercised at expiration. Cash-settled — no shares change hands. SPX 0DTE is popular because of this (no assignment risk).
Section 2
The Greeks — Full Breakdown
The Greeks quantify how an option's price changes in response to different variables. For a 0DTE scalper, Delta and Gamma are the most critical. Theta is your enemy if you hold too long. Vega matters on news days. Rho is irrelevant.
Delta
How much the option price moves per $1 move in the underlying. Calls: 0 to +1. Puts: −1 to 0. ATM ≈ 0.50. Also represents approximate probability of expiring ITM.
Gamma
The rate of change of Delta. How fast Delta grows as the stock moves. Highest ATM near expiration. On 0DTE, Gamma is explosive — this is why options can go 100%+ in minutes.
Theta
Daily time decay. How much value the option loses per day just from time passing. Enemy of buyers, friend of sellers. Accelerates dramatically in the final hours of 0DTE.
Vega
Sensitivity to Implied Volatility (IV). A 1% rise in IV increases option price by Vega amount. IV crush after earnings/events destroys premiums even if direction was right.
Rho
Sensitivity to interest rate changes. Completely irrelevant for 0DTE scalping. Ignore it entirely.
Greeks Cheat Sheet for 0DTE Scalpers
| Greek | What It Means in Practice | 0DTE Action |
|---|---|---|
| Delta (Δ) | Your directional exposure. Delta 0.50 = option moves $0.50 per $1 move in stock. | Target 0.30–0.50 Delta for ATM scalps. Higher Delta = more expensive but moves more. |
| Gamma (Γ) | Acceleration of Delta. ATM 0DTE options have massive Gamma — small moves create huge % gains. | This is your edge. ATM 0DTE Gamma is highest in the market. Ride the acceleration. |
| Theta (Θ) | Time decay accelerates exponentially near expiration. Final 2 hours are brutal for buyers. | Never hold a losing 0DTE into the afternoon. Cut losses fast. Theta is merciless. |
| Vega (ν) | Less impactful intraday on 0DTE (short time = less Vega sensitivity). | Watch out on FOMC/CPI days — IV spike before the event, IV crush after. Don't hold through. |
| Rho (ρ) | Measures interest rate sensitivity. | Irrelevant. Skip it. |
How the Greeks Interact
The Greeks don't operate in isolation. On a 0DTE ATM option, Gamma and Theta are in direct conflict: Gamma is working for you (amplifying moves), while Theta is working against you (eroding value every minute). The longer you hold a losing position, the more Theta compounds the loss. The faster you ride a winning move, the more Gamma compounds the gain. This is why the 369NTC strategy uses a tight 0.5% stop and a fast 2% target — it maximizes Gamma capture while minimizing Theta exposure.
Section 3
All Option Strategies — Complete Reference
Basic Positions (4 Core Trades)
CALL Long Call
Bullish. Buy a call option. Profit when stock rises above strike + premium. Max loss = premium paid. Unlimited upside. Best for: directional momentum plays.
PUT Long Put
Bearish. Buy a put option. Profit when stock falls below strike − premium. Max loss = premium paid. Large upside (stock → $0). Best for: downside protection or bearish scalps.
SHORT Short Call (Naked)
Bearish/Neutral. Sell a call you don't own. Collect premium upfront. Max profit = premium. Unlimited risk if stock rockets. Requires significant margin. Not for beginners.
SHORT Short Put (Naked)
Bullish/Neutral. Sell a put. Collect premium. Max profit = premium. Large risk if stock crashes. Used by income traders who want to own stock at a lower price.
Debit Spreads — You Pay to Enter
Spreads reduce cost basis and cap both profit and loss. You pay a net debit to enter.
| Strategy | Outlook | Construction | Max Profit | Max Loss |
|---|---|---|---|---|
| Bull Call Spread | Bullish | Buy lower strike call + Sell higher strike call (same expiry) | Width of strikes − debit paid | Debit paid |
| Bear Put Spread | Bearish | Buy higher strike put + Sell lower strike put (same expiry) | Width of strikes − debit paid | Debit paid |
Credit Spreads — You Collect Premium to Enter
You receive a net credit upfront. Your max profit is the credit collected. Defined risk on both sides.
| Strategy | Outlook | Construction | Max Profit | Max Loss |
|---|---|---|---|---|
| Bull Put Spread | Bullish | Sell higher strike put + Buy lower strike put | Credit received | Width − credit |
| Bear Call Spread | Bearish | Sell lower strike call + Buy higher strike call | Credit received | Width − credit |
| Iron Condor | Neutral | Bull Put Spread + Bear Call Spread combined. Four legs total. | Total credit received | Wider wing − credit |
| Iron Butterfly | Neutral | ATM short straddle + OTM long call + OTM long put (wings) | Total credit received | Wing width − credit |
Volatility Strategies
These strategies bet on the magnitude of a move, not the direction. Perfect for earnings, FOMC, or major macro events.
LONG Long Straddle
Buy ATM call + Buy ATM put (same strike, same expiry). Profit if stock makes a big move in either direction. Expensive — needs a large move to overcome premium paid.
LONG Long Strangle
Buy OTM call + Buy OTM put. Cheaper than straddle but needs an even bigger move to profit. Classic pre-earnings play when direction is unknown.
SHORT Short Straddle
Sell ATM call + Sell ATM put. Collect large premium. Profit if stock stays flat. Unlimited risk on both sides. Requires high margin. Used by premium sellers in low-IV environments.
SHORT Short Strangle
Sell OTM call + Sell OTM put. Wider profit zone than short straddle. Lower premium collected but higher probability of profit. The "Tasty Trade" classic.
Advanced Strategies
| Strategy | Construction | Best Use Case |
|---|---|---|
| Calendar Spread | Sell short-term option + Buy longer-term option (same strike) | Profit from Theta decay difference between expirations. Works in flat markets. |
| Diagonal Spread | Different strike AND different expiration (e.g., Poor Man's Covered Call) | Directional bias with time spread component. Cheaper than owning stock. |
| LEAPS | Options with 1+ year to expiration | Stock replacement with leverage. Low Theta decay. Long-term directional bets. |
| Ratio Spread | Buy 1 option, Sell 2 (or more) options at different strike | Reduce cost basis. Profit in a specific range. Unlimited risk if sold options go deep ITM. |
| Backspread | Sell 1 option, Buy 2 (or more) options at different strike | Net debit or credit depending on strikes. Profit from large moves in one direction. |
0DTE Specific Playbook
- Strike Selection: ATM or 1–2 strikes OTM. ATM = maximum Gamma. 1–2 OTM = cheaper premium, still high Gamma, needs slightly bigger move. Far OTM = lottery tickets, low probability.
- Theta Decay Curve: Theta is not linear. It accelerates exponentially in the final 2–3 hours. A $1.00 option at 9:30 AM might be worth $0.30 at 3:00 PM even if the stock hasn't moved.
- Entry Timing: Avoid the first 30 minutes (9:30–10:00 AM ET) — opening volatility creates fake breakouts. Best trend windows: 10:00–11:00 AM ET and 2:00–3:00 PM ET.
- Position Sizing: Never risk more than 2–5% of account per trade. 0DTE options can go to $0 in minutes. Size accordingly.
- Lottery Ticket vs. High Probability: Far OTM 0DTE options (e.g., 5+ strikes OTM) cost pennies but expire worthless 95%+ of the time. ATM/1-OTM options cost more but have much higher win rates and respond to smaller moves.
Section 4
Reading the Options Chain
The options chain is a real-time table showing all available strikes and expirations for a given underlying. For a 0DTE scalper, you'll live in this view every day.
| Column | What It Means | What to Look For |
|---|---|---|
| Bid / Ask | Bid = what buyers will pay. Ask = what sellers want. The spread is your immediate cost to enter and exit. | For SPY/QQQ, bid/ask spread should be $0.01–$0.05. Wide spreads (>$0.10) on 0DTE = avoid. |
| Last / Mark | Last traded price. Mark = midpoint of bid/ask. | Always try to fill at or near the mark price. Paying the full ask is expensive on 0DTE. |
| Volume | Number of contracts traded today. | High volume = liquid market, easy to enter/exit. Low volume = wide spreads, hard fills. |
| Open Interest (OI) | Total contracts held overnight (not closed yet). | High OI at specific strikes = key support/resistance levels. Market makers defend these. |
| IV (Implied Volatility) | The market's expected move baked into the option price. | High IV = expensive options. Low IV = cheap options. Compare to historical IV. |
| Delta | Directional sensitivity. Shown in the chain for each strike. | ATM ≈ 0.50 Delta. Use this to quickly identify moneyness. |
Open Interest — What It Tells You
High open interest at specific strikes (especially round numbers like $500, $505, $510 on SPY) indicates where large institutional positions are concentrated. These strikes often act as gamma walls — the underlying tends to gravitate toward or get pinned at these levels near expiration, especially on 0DTE. Market makers who sold options at these strikes hedge by buying/selling the underlying, which creates a self-reinforcing gravitational pull.
Unusual Options Activity (UOA)
UOA occurs when volume significantly exceeds open interest at a specific strike — meaning new, large positions are being opened. This often signals informed money (institutions, insiders) positioning ahead of a move. Tools like Unusual Whales, Market Chameleon, and Cheddar Flow aggregate this data in real time. For 0DTE scalpers, UOA in the same-day expiry is particularly significant as it suggests smart money is betting on an intraday move.
Section 5
Implied Volatility (IV) — Deep Dive
Implied Volatility is the market's forward-looking expectation of price movement, expressed as an annualized percentage. It is derived from the current option price using the Black-Scholes model. Unlike historical volatility (what actually happened), IV is purely what the market expects to happen.
IV Rank vs. IV Percentile
| Metric | Definition | How to Use It |
|---|---|---|
| IV Rank (IVR) | Where current IV sits relative to its 52-week high/low range. IVR 80 = IV is in the top 20% of its range. | IVR > 50 = options are expensive → consider selling. IVR < 30 = options are cheap → consider buying. |
| IV Percentile (IVP) | What % of days in the past year had lower IV than today. | More statistically accurate than IVR. IVP 80 = IV was lower on 80% of days in the past year. |
IV Crush — The Options Buyer's Nightmare
Before a major event (earnings, FOMC, CPI), IV rises dramatically as uncertainty increases. The moment the event passes, uncertainty collapses and IV drops sharply — this is called IV crush. Options buyers who held through the event often see their options lose 40–70% of value even if they got the direction right, because the premium they paid included a large IV component that evaporated instantly.
VIX and Its Relationship to SPY/QQQ Options
The VIX (CBOE Volatility Index) measures the 30-day implied volatility of SPX options. It is the market's "fear gauge." When VIX rises, put premiums on SPY/QQQ become very expensive (market is paying for downside protection). When VIX is low (below 15), options are cheap across the board — ideal for buying options. For 0DTE scalpers, a rising VIX day (like April 7th) means options move more per dollar of underlying movement, amplifying both gains and losses.
| VIX Level | Market Condition | 0DTE Strategy Implication |
|---|---|---|
| < 15 | Calm, low volatility | Options cheap. Good for buying. Expect smaller intraday moves. |
| 15–25 | Normal volatility | Standard conditions. ATM 0DTE scalping works well. |
| 25–35 | Elevated volatility | Options expensive. Bigger moves. Higher risk/reward. Size down. |
| > 35 | Fear/crisis mode | Extreme moves. Options can go 500%+ or $0 in minutes. April 7th territory. Trade smaller. |
When to Buy vs. Sell Options
- Buy options when: IV Rank is low (<30), VIX is low, you expect a big move, or you're scalping 0DTE momentum (short hold time minimizes IV risk).
- Sell options when: IV Rank is high (>50), after a major event (IV crush), or when you want to collect premium in a range-bound market.
Section 6
Quick Reference Tables
Master Strategy Comparison
| Strategy | Outlook | Max Profit | Max Loss | Best For |
|---|---|---|---|---|
| Long Call | Bullish | Unlimited | Premium paid | 0DTE momentum scalps, directional bets |
| Long Put | Bearish | Large (stock→$0) | Premium paid | 0DTE downside scalps, hedging |
| Short Call | Bearish | Premium collected | Unlimited | Income on stocks you expect to fall |
| Short Put | Bullish | Premium collected | Strike − premium | Income, acquiring stock at discount |
| Bull Call Spread | Bullish | Width − debit | Debit paid | Defined risk bullish plays |
| Bear Put Spread | Bearish | Width − debit | Debit paid | Defined risk bearish plays |
| Bull Put Spread | Bullish | Credit received | Width − credit | Premium collection, high probability |
| Bear Call Spread | Bearish | Credit received | Width − credit | Premium collection, high probability |
| Iron Condor | Neutral | Total credit | Wider wing − credit | Range-bound markets, premium selling |
| Iron Butterfly | Neutral | Total credit | Wing width − credit | Tight range, max premium collection |
| Long Straddle | Volatile | Unlimited | Both premiums | Pre-earnings, major events |
| Long Strangle | Volatile | Unlimited | Both premiums | Cheaper volatility play, bigger move needed |
| Calendar Spread | Neutral | Limited | Debit paid | Theta decay, flat markets |
| LEAPS | Bullish/Bearish | Large | Premium paid | Long-term directional bets, stock replacement |
Greeks Quick Reference
| Greek | Symbol | Range (Calls) | Range (Puts) | Key Fact |
|---|---|---|---|---|
| Delta | Δ | 0 to +1 | −1 to 0 | ATM ≈ ±0.50. Also = approx. probability of expiring ITM. |
| Gamma | Γ | Always positive | Always positive | Highest ATM, highest near expiration. Explosive on 0DTE. |
| Theta | Θ | Always negative (buyer) | Always negative (buyer) | Accelerates near expiration. Enemy of option buyers. |
| Vega | ν | Always positive (buyer) | Always positive (buyer) | Highest for ATM, long-dated options. IV crush kills Vega. |
| Rho | ρ | Positive | Negative | Irrelevant for 0DTE. Ignore. |
0DTE Scalping Pre-Trade Checklist
- It is past 10:00 AM ET (opening volatility has settled).
- I am risking 2–5% or less of my account on this single trade.
- I am trading a liquid strike — ATM or 1–2 strikes OTM on SPY/QQQ.
- The bid/ask spread is tight ($0.01–$0.05 for SPY/QQQ).
- I have a hard stop loss defined before entering (e.g., 20–50% of premium).
- I know today's macro calendar — no surprise FOMC/CPI/NFP in the next 30 minutes.
- I have checked the VIX level and adjusted position size accordingly.
- I am not revenge trading after a loss — I am in a clear mental state.
- I will not hold this position past 3:00 PM ET (Theta acceleration window).
- I have a profit target defined — I will not get greedy and hold a winner to zero.