Long Calls and Long Puts on 0DTE
The simplest 0DTE trade is buying a call or a put — bet on direction, lose at most the premium. The math is unforgiving but the structure has its uses. What realistic outcomes look like, when these trades fit, and why the average result is a loss.
The simplest 0DTE trade is buying a call if you think SPX is going up today, or buying a put if you think it's going down. Loss is capped at the premium you paid. Upside is colloquially called "unlimited" but is realistically bounded by what SPX does in a few hours.
The math behind these trades is unforgiving. Most of them expire worthless. The few winners pay multiples of the premium — but the expected value on routine trades is negative because the variance risk premium runs against the buyer.
This article covers the structure, the realistic probability framing, when long-option 0DTE trades fit, when they don't, and what a typical sequence of trades looks like.
The structure
Buy a call: pay premium today, receive a cash payment at expiration equal to (SPX − strike) × $100 per contract, but only if SPX closes above the strike. If SPX closes at or below the strike, the call expires worthless and you lose the premium. The structure was introduced in What Is an Option?.
Buy a put: same logic in reverse. Premium paid today; cash payment of (strike − SPX) × $100 if SPX closes below the strike; nothing if SPX closes above.
A concrete example. SPX is at 5000 at 9:45am. You buy the 5000-strike SPX call for $8, expiring at 4:00pm today. Cost per contract: $800.
- P&L at spot
- -$800
- Max profit (range)
- $9,200
- Max loss (range)
- -$800
- Net debit
- $800
The familiar hockey stick: flat at -$800 for any close at or below 5000, sloping up linearly above 5008 (the break-even — strike plus premium). Maximum loss: $800. Maximum gain: technically uncapped, realistically a few thousand dollars even on a sharp rally.
The math is unforgiving
The 5000-strike call with SPX at 5000 has delta around 0.50. That means if you hold to expiration, the probability the option finishes ITM is approximately 50%. Sounds even-odds.
But finishing ITM isn't the same as making money. Break-even is at strike + premium = 5008. To break even, the option has to finish ITM by at least the premium you paid. So the probability of profit is the probability SPX closes above 5008 — which is meaningfully less than 50%.
For a $5 OTM call (strike 5005), starting delta might be around 0.40 — but break-even is 5005 + premium ≈ 5009. Probability of profit smaller still.
For a $10 OTM call (strike 5010), delta starts around 0.30. Break-even moves further out. Probability of profit shrinks again.
The unforgiving part is time decay. Every minute that passes, theta pulls value out of your long option. Unless the underlying moves your way fast enough to compensate, the option's price drifts down throughout the day. By the close, OTM options are worth zero. ATM options are worth zero unless SPX is sitting right at your strike. The math doesn't wait.
The lottery-ticket framing
The "lottery ticket" label gets used for far-OTM 0DTE options. Useful mental model — slightly misleading.
A literal lottery ticket has odds in the millions-to-one against. A far-OTM 0DTE call doesn't have those odds. A 20-delta OTM 0DTE call has roughly a 20% chance of finishing ITM, and somewhere around a 10–15% chance of being profitable after premium. That's a much better hit rate than a state lottery.
What is lottery-ticket-like is the payoff shape: small expected value, fat right tail, frequent small losses, occasional outsized wins.
The mental model that fits: long-option 0DTE is buying a cheap asymmetric bet — not playing the lottery. The hit rate is structurally low (because time decay works against you) but the payoffs when right are non-trivial. The strategy fits when you have a reason to think the actual move will be larger than what the IV is pricing.
When these trades fit
Long-option 0DTE has legitimate uses. Situations where the math can favor it:
Strong directional view with a defined catalyst. A specific known event likely to move SPX intraday — FOMC, jobs report, CPI release, an earnings-heavy day. The IV on 0DTE typically already prices these events, but if you have a view on the direction of the reaction (not just that there will be one), a long call or put captures the move with downside capped at the premium.
Hedging an existing position. A 0DTE put is a low-cost way to insure a long SPY portfolio against a specific same-day risk. You're paying the premium for the day's protection — predictable cost in exchange for a defined downside cap.
Asymmetric tail bets when you believe IV underprices the move. If you genuinely think the underlying might move more than the chain is pricing, long premium is the structural way to express that. You're betting realized vol > implied vol over the trade's life. (See Implied vs Realized Volatility for the framing.)
Capping a directional bet's downside. Instead of leveraged exposure where loss size is uncapped, an OTM call has a built-in floor at zero (you lose at most the premium). For traders who size with explicit max-loss in mind, that's a meaningful structural advantage.
The common thread: a specific reason to think the actual move will be larger or more directional than what IV is pricing.
When these trades don't fit
Situations where the structure works against you:
No specific view, just "I think the market will move." The variance risk premium works against routine long-premium trades in the absence of an information or timing edge. Selling premium is the structurally favored side on average; buying premium gives up that edge.
As a routine income strategy. Daily long-premium trades compound losses over time. The IV-greater-than-realized pattern means each trade's expected value is slightly negative on average; many trades in a row produce a steady drawdown that the occasional win doesn't fully recover.
Sized as if every trade will work. Even with edge, the hit rate on long-option 0DTE is low. Sizing each trade as if it's going to win — committing 5–10% of account per trade — is the fastest path to a major drawdown. The modal outcome of any single trade is a loss; sizing has to account for that.
Realistic outcome distribution
A rough sketch of what ten random long-ATM 0DTE call trades might look like (no information edge — just buying ATM 0DTE calls when you feel like it):
- 6–7 days: full or near-full loss of premium (call expires worthless or close to it).
- 2–3 days: small win or break-even-ish (option finishes slightly ITM, pays back something).
- 1 day: a meaningful win — option finishes meaningfully ITM, pays 2–4× the premium.
The arithmetic might look like: -$800 × 7 = -$5,600 of losses, +$400 × 2 = +$800 of modest wins, +$2,000 × 1 = +$2,000 of a real win. Net: roughly -$2,800 across the ten trades.
These numbers are illustrative; the actual distribution depends on which strikes you pick, which IV environment, which days you traded. The qualitative pattern — mostly small losses, occasional larger wins — is what's reliable about the structure.
The same arithmetic with edge — say, only trading days that have a catalyst your strategy can read — looks very different. Hit rates stay low; wins are larger because you're picking days when the direction of the move is more predictable. The strategy can be positive-expected-value if the edge is real and consistently identifiable.
Key takeaways
- Long calls and long puts on 0DTE are directional bets with capped downside. Pay premium; receive cash if the underlying moves your way far enough by the close.
- Delta is approximately the probability of finishing ITM, but the probability of profit is lower — the underlying has to move past the strike plus the premium paid to break even.
- The "lottery ticket" label describes the payoff shape (small expected value, fat right tail) more than the hit rate. Hit rates are low but not literally lottery-tier.
- These trades fit when you have a specific directional view tied to a catalyst, when hedging an existing position, or when you genuinely believe IV underprices the expected move.
- They don't fit as routine income strategy or when sized as if every trade will work. The variance risk premium runs against routine long-premium positions; sizing has to account for the modal outcome (a loss).