Yo pit crazies!
Zero DTE options have taken the market by storm for a few reasons.
The biggest one is that they move.
Take the example from Apple (AAPL) below. AAPL is a flight-to-quality stock because they are not committing to capex on AI spending, at least not yet. AAPL is $10 from its all-time high and looked very good on Tuesday when the rest of the market was getting a beat down.
Back to why traders like the zero DTE or near zero-day options. They move. The AAPL Feb 18 262.50 calls ran from 50 cents to $2.65 on Tuesday. That kind of move gets traders excited. The less time to expiration, the faster the option moves, and it is hard to get faster than having an option expire today.
The Mag 7 Doubt Creates Opportunity
The stocks that kept the market moving for the last three years are slowing down. Most are off 20 percent or so from their highs. I do not think that will change tomorrow or this week. But it will create great opportunities around zero DTE. Those short-term options have gamma, which means they change value very fast and are highly liquid to boot. This kind of trade action will keep stocks orbiting, moving up and down but going nowhere.
The VIX Confusion Signal
The irony is not lost on me that zero DTE listed for equities in the Mag 7 just as they were heading for a correction. But the tell I missed started way back before Christmas. VIX has been steadily climbing for weeks and this was the second time in two weeks VIX tried to jump to Zone 4. All the while, SPY and most indices are just points from all-time highs. Jumping to a near 24 VIX and only down two percent from all-time highs is the ultimate confusion signal.
What it does signal is that we will orbit with just bigger ranges. SPY had a 1.5 percent range today with little trouble. Zero DTE players gobbled the dip when VIX did not continue its move higher. I think SPY orbits but goes nowhere as the market swaps out some Big Tech for Low Tech.
It will surprise me if VIX can really drop this week below 18.
Either way, 0DTE options will let you make the most of it.
For the rest of the week, Mark and Licia are putting on a crash course into 0DTE options and even giving some picks away if the opportunity is right.
To Your Trading Success,
