22 minutes in the trade – and I have made 0,32 % of the total capital risked. That is the average results after I have completed my first 100 trades with the 1DTE High Delta Iron Condor strategy on SPX.
0,32 %. It sounds so little. Can that be an options strategy worth pursuing?
But then think about the short time in the trade. That means that the same capital can be reused at least one more time the same day, either on the same strategy or a different one. Also remember that a trade making 0,32 % daily over the span of 250 trading days in a year turns into an annualized compounding profit of 122 %.
This is the power of 0DTE options trading. If our strategy has a positive expectancy, that is.
Most of my options trading are different day trading strategies. My base strategy is 0DTE Breakeven Iron Condor, which I covered in an extensive article in January 2022 and then later published an update in August 2022.
What does DTE mean?DTE = Days To Expiration. All options have a date when they expire. A 0DTE option expires today = 0 Days To Expiration. A 1DTE option will expire the next trading day = 1 days from now.
Over the last months, I have tested a different day trading strategy I will call 1 DTE High Delta Iron Condor. In short, it includes selling a high delta Iron Condor with a very wide widths a few minutes after the market opens one day before expiration and closing it as soon as it hits the stop loss or a profit level of 5 – 10 % of the credit received.
The trade primarily profits by the big theta crush shortly after the market opens.
Iron Condor: An options trading strategy where you sell both a call credit spread and a put credit spread at the same time. The trade profits if the underlying stays within a defined range when the options expire.
1DTE High Delta Iron Condor: Profitable so far
I have now completed exactly 100 trades with this strategy. Each of the trades has been 1 contract only. These are the results:
- 78% of the trades have been wins, and correspondingly 22 % have been losses
- The average trade made 0,32 % compared to the buying power committed to the trade
- In total, I have made 2577 dollars on these 100 trades, which makes up for an expectancy of 25,8 dollars per trade
- The shortest trade lasted only four minutes before I hit my profit level, and the longest wait was 91 minutes. The average trade length was 22 minutes.
Inspired by Dave Goodvin
I was inspired to try this strategy by Dave Goodwin in the TastyTrade Options Facebook group. He has had great success with the strategy for a long time – and in the Facebook group, the strategy was actually named after him, being hashtagged #DGSS (Dave Goodwin Synthetic Strangle).
The group members have different ways of implementing the strategy – and my way differs a little bit from most of them. For instance, I take profits earlier than my peers and run a tighter stop loss. That is why I have given it a different name: 1DTE High Delta Iron Condor.
1DTE High Delta Iron Condor
So this is my version of the strategy – and the one I have followed in most of my trades:
- I enter an Iron Condor with expiration the next day within 5 – 10 minutes after the market opens on SPX, the option product for the S&P 500 index.
- The deltas on the shorts are between 22 to 25 and the widths of the spreads are 100. This makes it close to a synthetic strangle. Typically I collect a premium of 1500 – 2000 dollars – and the capital at risk is thus 8000 – 8500.
- I enter a take profit order and a stop loss immediately after the trade is filled
- The profit level is normally set to about 5 – 7 % of the premium collected. In most cases that will be between 80 and 120 dollars per contract.
- The stop loss is set only on the shorts. I set the stop loss at 200 dollars beyond the premium collected plus what I bought the longs for. Example: If I collected 1500 dollars in premium and paid 80 dollars for the longs, the stop loss will be set at 1780 dollars.
- If the profit level hits, the trade is automatically closed and I am fine! However, If the stop loss hits the shorts, I immediately move my attention to the remaining longs. I first close out the long on the side we have been moving away from. Then I look at the last one. Usually, I prefer to close it immediately. But if the market is moving in the right direction, I might choose to hold on for a bit, hoping to gain some of the loss back.
- I will always close the trade on the same day, no matter what. I will NEVER roll or hope it will survive the overnight risk. Also, I never reenter. I do one trade per day with this strategy – and that’s it.
Expectancy: 26 dollars per contract per trade
All my trades so far have been for one contract only. Based on my first 100 trades, the strategy has a positive expectancy of 26 dollars per contract per trade. Or said in other words: I have made 2577 dollars on this strategy during the last few months.
For me it is still too early to say if the strategy will be consistently profitable in the long run. I do notice that the results seems to me significantly more volatile than my bread-and-butter 0DTE Breakeven Iron Condor strategy. It is easy to see a situation in which the market may not favor this strategy for some period.
Thus I willl stick to one contract only until I have logged a much larger number of trades. And it will be a secondary – or supplementary – day trading strategy for me. But I like the strategy, especially that it is so fast. So I will keep trading it most days.
This article is only to describe my own experience with this strategy, and should not be interpreted as financial advice in any way. Remember: Any options strategy carries great risk – and this particular strategy has the potential to blow out your account if you do not use stop losses or manage the risk well.
A couple of final words about the stop loss
I think it is extremely risky to do the 1DTE High Delta Iron Condors without a stop loss. With widths of 100, you are for all practical purposes trading a strangle, and the losses can compound extremely fast if the market makes a sudden and huge move against you.
Let me add two points about how I have chosen to set the stop losses:
First, I set both a stop limit and a stop market order, using the OCO (One Cancels the Other) functionality. The stop market order serves as a last line of defence the stop limit order is not filled for some reason.
Second, I only set the stop on the shorts/strangle. For the first couple of months I set the stop loss on the full Iron Condor. But I experienced quite bad fills on a couple of occasions. I have not had bad fills like that after I changed to only the shorts. But it requires that I pay attention so that I can close the longs manually afterwards. I therefore only put on this trades on days when I have the time to follow it closely.
Would you like to learn more?
I strongly recommend that you join the TastyTrade Options Facebook group and search for #DGSS. And do read the all the comments – very often that is where a lot of the value is. I do love this Facebook group – with lots of members who are eager to share their knowledge with each other.
do you mind doing screen record on how you do the OCO or even show a sample of your log?
Thank you so much for sharing
There is a screenshot example of this way of setting up stop losses in this article: https://www.sandvand.net/2022/01/02/0dte-breakeven-iron-condor/
Great article and great insights! I was wondering about the stops and why do you choose to stop the strangle instead of the stops individually on ead side and let the winner side to run?
Thanks for your kind words, Patrick! I have been considering doing the stops individually on each side, as you suggest. In fact, that is how I do it on my other Iron Condor strategies. But I have decided against it for a couple of reasons. First to keep it simple. If the trade goes against me, I just want to be out of it and move on. The second reason is that it would increase the risk too much. Markets can change direction quickly – and the risk of double stop losses is probably quite a bit higher than for low delta strategies. Do you have experience with that way of doing it?
My Stops are on each short legs, you mentioned in your article that might be helpful to keep running the wins! If one of the stops is triggered then I closely watch the other 3 and decide on how to close them, it’s a lot of stress and I’m also looking to find a more mechanical way to approach this.
Thanks for sharing your experience, and for the extensive and clear write-ups.
I have one question for you: in this strategy, 1DTE, you set your stops only on the short side (put or call). But on your other strategy, the 0DTE, you set your stops on the whole spread (credit put spread and credit put spread) as mentioned on your Januarey and August posts.
Why is that? You certainly have a reason, just curious what that is.
Since this strategy has much higher deltas and the position value can change very fast, I want to be out of the whole position at once if it moves against me. In the beginning I put the stop loss on the full Iron Condor. But I experienced a few relatively bad fills, probably because the long on one side had lost all value and there was no buyers. That is why I decided to put the stop loss on the strangle instead – and then manually close the longs immediately afterwards. I have not had those bad fills doing it this way.
Hello John, thank you for sharing your experience. I learned a lot from your option-trading write-ups. I have a question regarding your 1dte strategy. In the tasty trade facebook group someone posted, that it (#DGSS strategy) works best when VIX is over 23. In the last months the VIX was under 23. Do you think a VIX filter would improve this strategy?