Contract Sizing

Contract Sizing is extremely important with 0-DTE Options

Contract sizing in the number of contracts entered per specific pre-defined rules. These rules can be max loss dollar amount per trade, different trade set up or different strategies.

When trading 0DTE options it is important to understand the risks associated with short term options and the difference of a hedged and unhedged trade. We always position size based on max risk, never the potential loss using a “protective” stop loss.

Greed will get you, so it is important that no matter how perfect a setup looks you stay calm and stick to the proper contract size. I have seen the perfect set up complete fall apart and end up a loser, so please be warned options move fast.

Never risk it all on one trade. This style of trading has multiple trades per day so there is no reason to oversize any trade. Market conditions can change quickly resulting in a negative outcome even if we were right on direction.

Credit spreads are 5 to 10 wide, and we are always looking for at least +1 on scalps and +4 on runners. We scalp spreads in the morning and hold our mid-day pivot trade to expiration. Trading 5 contracts can result in a great living taking 1-3 points per day.

The Lotto Trade is a one contract trade that is a very high-risk long call or put usually taken with entries below .75 cents during the last two hours of the day looking for a gain of 400 – 1000%.

Have a plan to scale – Trading is a business and with any business there are rules. Only add contracts on a pre-made plan, never on emotions.

We do not add in to a losing 0DTE option trade.