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How I trade the 0DTE Breakeven Iron Condor

After two years and 2796 trades: The 0DTE Breakeven Iron Condor remains a consistently profitable strategy. Here is how I trade it.

60 % of the trades are losses – only 40 % wins. But because the losses on average are much smaller than the wins, the 0DTE Breakeven Iron Condor is still my most profitable options trading strategy.

I have written about this strategy twice before – first in January 2022 and then in August of the same year. The two articles give a quite detailed walkthrough of the strategy.

But how I trade the strategy evolves over time. Recently I was invited by the Online Traders’ Club Singapore to share how I trade it – and that triggered me to write a new summary.

See my webinar about 0DTE Breakeven Iron Condor here

If you really want to dig into this strategy, I recommend that you watch the presentation I gave for the Online Traders’ Club Singapore. I describe the strategy in every detail, including how I trade it and how I manage the risk. This article is a summary of the content presented there.

My slides about 0DTE Breakeven Iron Condor

Here are the slides I used in my presentation for Online Traders’ Club Singapore.

This is the 0DTE Breakeven Iron Condor

The 0DTE Breakeven Iron Condor is based on SPX, the option version of the US Standard & Poor 500 index.

Here are the main principles of the strategy:

  • Sell 0DTE Iron Condors at 5 – 10 delta at multiple intervals during the day – always trying to collect about the same premium on both sides.
  • Set stop losses on each separate credit spread equal to the total premium collected for the Iron Condor. Personally, I add 0.05 $ to the stop losses to give a bit of extra room.
  • Tighten the stop losses as needed to manage the total risk of your positions and ensure profits.
  • Change the stop losses to only the shorts during the last hour or when the longs have no more value.

The main idea is to benefit from theta decay throughout the day.

Most trades are losses

I have traded the strategy for two years and done 2796 trades in that period. It may sound a lot, however, when you divide it into 24 months you realize it is just a bit more than 100 trades per month or 25 trades per week.

But this large number of trades and thanks to the detailed trading log that I keep, give some valuable statistics.

Let us start with the win rate.

The win rate has varied very little during these two years. It stays at around 40 %.

And that would be a 60 % loss rate, you may smartly add. Yes, that is true. Most trades are losses with this strategy.

But here is the key fact: The average win has been 2.3 times as big as the average loss. And that is exactly why this strategy has stayed profitable. The losses are many but small. Since the wins are much bigger, the strategy has a positive expectancy.

So…the win/loss rate has stayed very stable…

3.7 % of the trades experience that the stop losses are hit both on the call and the put side. Also, this rate has changed very little over the two years I have traded this strategy.

And with those statistics, you can measure the expectancy of the strategy. Please feel free to use my statistics after 2796 trades: Win rate: 60 %. Average profit: 2.3 times the average loss.

And the formula: Expectancy = (win rate X average size of the win) – (loss rate X average size of the loss)

But what is the actual profitability of the 0DTE Breakeven Iron Condor?

There are many ways to measure the profitability of a 0DTE options trading strategy. My preferred measurement is the average return in percent of the total capital risked.

For every trade, I log how much capital I risk on that particular trade. Whatever profit and loss I get will then be measured as a percentage against that.

In this way, I can take the total net profit/loss for any period and measure it as a percentage of the total capital risked in all the trades with the same strategy in the same period.

Other traders prefer to use the Premium Capture Rate, measuring the net profit as a percentage of the total premium they collected.

Here are the results with these two methods:

You may ask: Is 0.45% something to be impressed with? My response: Try to annualize it!

Let me add that over the two years, only two months have shown losses (January 2022 and 2023)

My favorite measure of profitability

I very much favor average return per trade as the best way to compare different 0DTE strategies. It takes into account two of the main factors in trading:

  • How much money you made
  • How much capital you risked

Of course, you should not risk your full capital any day. And even 0DTE may have different time horizons; some strategies typically close within 30 – 60 minutes, and other strategies depend on time decay happening throughout the full trading day.

Yet, within the 0DTE time frame, I think this is the best way to compare different strategies and look at how a particular strategy is doing over time.

And this is how I measure the average return per trade: I take my net profit over any time period and measure it as a percentage of the total capital I risked over the same period.

Example: Let’s say I do 10 trades of 1 contract each. All collect 100 dollars after fees and commissions. The widths on all trades are 30 points on SPX. I have a 40 % win rate and 35 dollars loss on average on the losses. In this scenario the four wins collected 400 dollars (4X100). The six losses lost in total 210 dollars (35X6). So the net profit is 190 dollars (400-210). On each trade I risked 3000 dollars minus the 100 dollars in premium, which would be 2900 dollars. In total on the 10 trades I therefore risked 29,000 dollars. To find the average return in this example I calculate which percentage 190 dollars is of 29,000 dollars. That would be 0.66%.

Premium Capture Rate (= the total net profit you made in any time period as a percentage of the total premium you collected in the same period) is a good measure to study how a particular strategy develops over time.

However, it does not say anything about how much capital you risked making the profits, and for that reason, I do not think it is suitable for comparing different 0DTE strategies.

But that is my thinking, of course! You may think differently! Please let me know in the comments below – and I will try to respond!

How I trade the 0DTE Breakeven Iron Condor

So let me explain more in detail how I trade the 0DTE Breakeven Iron Condor.

BUT: If you are into the details, I really recommend that you watch the webinar I gave to Online Traders Club Singapore. I cover a lot more there than I am able to write in a dense write-up on my site.

Here are some of my main rules of how I trade 0DTE Breakeven Iron Condor:

  • My main priority is always to consider my total risk at any time
  • Regularly throughout the day, I ask myself: What is the WORST that can happen with my current positions?
  • I keep adjusting my stop losses to control my max losses and ensure profits.
  • I try to never have more than 3 – 4 positions that are at risk of double stop losses
  • I manage so that a maximum of 1-2 % of my account is at risk on any single day
  • I do many, but small trades. However, I let there be at least 30 minutes between each trade. This allows me to enter the positions at different market levels.

So, as you understand, my trading style is discretionary rather than mechanical. And always looking at my total risk is the number one trading rule.

There are many more rules than this. Again, I recommend that you watch my webinar with Online Traders Club Singapore if you really want to dwell into the details.

What is your experience?

Are you trading 0DTE on SPX as well? What is your experience? And what is your strategy? Share your thoughts and results in the comments below.

9 comments… add one
  • Marwan

    Hi John,
    Have you tried Doing the same strategy but with Future Options on /ES?
    Somebody mentioned that Buying power is 5 times less than SPX.
    Also Have you tried doing the same strategy on TSLA on expiration date, TSLA IV is higher than SPX, so you can have credit while selling.

    Regards

    • No, I have not traded on /ES at all, although I do follow it outside the market hours to get an indication of where SPX might move.
      And no, I have not tried TSLA either. For now, I prefer the indexes, as they are less volatile because of the many companies included. Did you trade a similar strategy on TSLA?

  • Zlatko

    Great stuff John! How does your strategy differ from the MEIC strategy by Tammy Chambless?

  • Richard Parrott

    I am enjoying your trading strategy. My questions:
    1. What are the lengths of your long legs from the shorts?
    2. You mentioned very briefly choosing your short strikes based on the delta. You mentioned a 10 delta. Is that consistent with all your positions?
    3. Do you ever adjust?
    Thanks, much!
    Richard

  • Matt

    John,
    Thank you for sharing your strategy and explaining it. Very interesting.
    Are you still trading this strategy and have you adjusted it at all?

    Best regards,
    Matt

  • Mike Ghazey

    What % stoploss do you start with and are there any rules to how you lower it throughout the day?
    I’ve done some back testing and the results with a fixed stop loss are similar to those with a trailing, but with a slightly higher CAGR for the trailing, and a higher MAR for the fixed, which is actually the converse of what I expected. What I want to test is a variable trailing stop loss such as if the underlying drops, the stop loss also drops, but not to the full extent. Such as if the initial premium was 1$ and the initial stop loss was 3$ and then the value of the option drops to .5$, the 200% stop loss would change to 300%, so it would go to 2 instead of 1.5, but I’m not aware of any tester that can apply this level of complexity.
    Thanks for sharing, love your work!

    • Mike Ghazey

      I found my answer to how you set the stop loss initially but I’m still working on a basis on how to adjust it throughout the day.

  • Danie Erasmus

    Hi John,
    What is your view on dropping the wings of the IC to increase the premium? I understand that it is the final protection for your account against catastrophic moves, but did the long legs’ protection play role in any of your trades? I suppose you could also improve premium by increasing the distance between long and short legs.

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