There are hundreds of 0DTE options trading strategies. But you are not likely to succeed with any of them if you do not log and analyze your trades. Here is an example from my 0DTE Breakeven Iron Condor strategy.
Why do the results of my bread-and-butter strategy vary so significantly throughout the year? How can it be that trades entered during the opening hours of the market at the beginning of the year were profitable, and the same trades during the last months of the year were barely making money?
0DTE options trading
0DTE options trading has exploded in popularity over the last couple of years. In fact, 0DTE options – options contracts expiring the same day (zero days to expiration) – now constitute a significant portion of all options trading.
And there are hundreds of different strategies. You can buy calls or puts to bet on the direction, you can sell iron condors to bet on moves within a certain range, or buy iron condors to bet on a big move in either direction, or do broken butterflies, iron butterflies, or any other kind of strategy. Some strategies carry explosive risk – and the corresponding chance of huge profit or huge loss, other strategies depend on small daily gains – and the corresponding small drawdowns.
- Read also: How I trade the 0DTE Breakeven Iron Condor
- Read also: Here are the results from 100 trades with 1DTE High Delta Iron Condor options strategy
My 0DTE strategy
Personally, I have tried a few of the strategies. And I have had solid wins and huge losses. Finally, I have ended up with the 0DTE Breakeven Iron Condor as my bread-and-butter strategy. It has served me well for 2 1/2 years with only three losing months so far. I have written extensively about the strategy previously. The last article is here.
But this article is not about the 0DTE Breakeven Iron Condor strategy as such. Instead, it is about the importance of logging your trades. And then analyzing them.
My example, though, is from the 0DTE Breakeven Iron Condor strategy and my own trades.
Running a trading log
I started logging my trades back in 2018 in an Excel sheet. For every trade, I log a number of details, such as the opening date, closing date, which strategy, collected premium/paid debit, adjustments, total risk (buying power), gross profit, net profit, and more.
This year I also started to record the opening hour of my 0DTE trades.
The Excel sheet now contains several thousand trades. This makes it possible for me to analyze the results of the different strategies I follow.
Today I cannot imagine doing 0DTE options trading without a good trading log.
Why do I log my trades
Why is that?
Because that is the only way I can systematically analyze the results of my trading.
Yes, I know that I can follow how my trading account develops. Does it go up or down? That part is easy. But for it to be useful information I also need to know the details of why it goes up and down. With 0DTE most of us put on several trades every day. For a single year that easily becomes more than 1000 trades.
We tend to think we remember what went well and what did not. But the fact is that most of us will be surprised when we start analyzing the actual details of our trading.
My 0DTE Breakeven Iron Condor example
And here is my own analysis surprise:
My trade log gives two conclusions about my profit and loss depending on which hours the trades were opened:
- There is a significant difference in results depending on which hour the trade was entered during the day
- However, these differences are not stable over time. In fact, the results from the first quarter of the year differ strongly from the last quarter of the year.
First quarter of 2023
The first example is how my 0DTE Breakeven Iron Condor strategy performed during the first quarter of 2023. The graphs show the average return per trade as measured against the average buying power used for each trade.
The results: All hours were profitable, except the lunch hour in New York. The hour before lunch, 11 – 12 in New York, stands out.
Second quarter of 2023
In the second quarter, I see significant changes.
Now the first half hour of the trading day is very profitable. Still, only the noon hour sees a loss. But if I was to follow this graph I should only trade the first half hour of the market, and then the last two hours.
Third quarter of 2023
The picture changes once more. No longer is there any profit to see before lunch – and the lunch hour sees an even bigger loss. The quarter is barely profitable with my strategy – and only saved by the last two hours of trading.
Fourth quarter of 2023
And the picture changes again in the fourth quarter.
Please note: This graph only covers half of the quarter = until mid-November. This quarter so far basically all the profit is during the last three hours of the day – and there are three losing hours.
And for the whole of 2023 so far
Adding it all together for 2023 so far (I am writing this mid-November):
The summary for the whole year shows that most of my profits are made after lunch. But also that there is only one losing hour – from 12:00 – 13:00 New York time. The overall results are a bit below my long-term average for this strategy.
What to learn from this?
Now, with so differing results for each quarter, is there any learning at all from this?
I think there is.
Here are my personal conclusions:
- Fight the recency bias! We all tend to put more weight into our recent results. However, these examples show that the recent experience may not be accurate for the long term.
- Keep logging! The longer you have data, the more trustable they are. My graphs are only for one year. But what if I log for 3-4 years more? My data will be more and more trustworthy.
- Remember that markets will change. The characteristics of the market are never stable. Past history does not tell all about what you can expect today.
How I will use these data
So how will I use these data? Will I change my trading style? Stop trading before lunch? Only trade during the last two hours? Because that would be the rational thing to do, right?
Here is my thinking:
- I will keep trading my 0DTE Breakeven Iron Condors throughout the day. My data so far is less than a year. It is not enough. And besides, by keeping trading throughout the day I increase the quality of my data.
- I will trade smaller and less frequently on less profitable hours and bigger and more often on profitable hours. That means that more of my trades, with the current results, will be at the end of the day. But I will still enter trades during the first hours.
- I will adjust quickly when I see the market change. For the time being my trades in the morning are not very profitable. But the very moment I see that change, as I actually observe right now in mid-November, I will put more risk into the morning hours.
- I will keep learning. This is not a one-size-fits-all exercise. And not a one-size-fits-at-all-times.
Back to the importance of logging
But this all brings me back to my main point: We need to log our trades!
And we need to analyze them.
I do not care how you log your trades. Personally, I use an Excel sheet. You may use external services, such as Wingman. Or a more simplified sheet.
The most important is that we log our trades.
And, as a minimum, we need to log them by strategy, results, total risk, and, of course, time stamps.
The fallacy of memory
Because this is what we will discover: We cannot trust our own memory!
We need to gather our data over a long period of time. And we need to analyze them systematically. And learn from the results. Ideally also compare our own log with the results from backtesting, for instance through Option Omega.
I sincerely believe that this is the only way to succeed with 0DTE options trading.
WHAT DO YOU THINK?