The rise of 0DTE (zero-days-to-expiration) options has opened the door to highly leveraged intraday trading on SPY, the S&P 500 ETF. These instruments promise fast profits — but just as often deliver rapid losses.
To evaluate the long-term viability of one popular approach — daily buying of SPY 0DTE calls — we ran a backtest: allocate 1% of capital each day to buy call options expiring that same day, over several years (2022–2025), using three types of calls.
Setup and assumptions
- Use 1% of capital daily to buy SPY 0DTE call options.
- Trades open at the market open and close the same day — no overnight exposure.
- No filtering based on market conditions, VIX, or macro factors.
- Three variants tested: at-the-money (ATM), 1% out-of-the-money (OTM), and 2% OTM calls.
What the data shows
ATM calls
These perform the least poorly. Losses are slower, with some profitable streaks on trending days. Still, the overall trend is negative — long-term capital decay.
1% OTM calls
Steeper losses, especially in 2022 and post-mid-2023. While occasional wins offer big payouts, low win rates and fast time decay prevent long-term success.
2% OTM calls
Worst performance. Rapid early losses flatten near $40K from $100K. These far-OTM calls act like lottery tickets — cheap, but rarely profitable. Shrinking capital makes recovery harder.
Why does this strategy fail?
Low win rate
0DTE calls require substantial intraday price movement in your favor. On most days, that just doesn’t happen — SPY tends to drift or chop within narrow ranges.
Theta decay
Options lose time value extremely quickly, especially with only a few hours until expiry. If SPY doesn’t move enough fast enough, the call loses value rapidly — even if you’re right directionally.
Poor risk-reward
OTM options offer high leverage, but the risk of total loss outweighs the rare big wins. Even when one or two big moves occur, they can’t compensate for dozens of small, consistent losses.
No edge
This strategy doesn’t rely on signals or context. It assumes randomness works in your favor — which it rarely does with options, where market makers hold the edge through pricing efficiency and implied volatility premiums.
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Frequently asked questions
Can you make money buying 0DTE calls on SPY?
A multi-year backtest of buying SPY 0DTE calls every day shows consistent losses across ATM, 1% OTM and 2% OTM strikes. Occasional large wins do not offset the low win rate and rapid theta decay, so the strategy bleeds capital over time.
Why do 0DTE options lose value so fast?
With only hours until expiration, theta (time decay) is extreme. If SPY does not move far enough in your favor quickly, the option loses value rapidly — even when you are right on direction.
What is a better alternative to buying 0DTE calls?
Trade setups that carry a genuine edge, such as earnings volatility plays where the expected move beats what options price in, rather than buying premium with maximum theta and no edge.