Good afternoon, and welcome! This afternoon, we' re broadcasting another great webcast from Schwab Coaching. My name is Ben Watson, Education Coach and Senior Manager here at Charles Schwab, and I' m joined out there in the chat by my good friend Cameron May, a 20-plus year veteran of the financial markets and a great educator. In fact, just earlier today, he got done talking about trading the trend and talking about the parabolic stop and reverse indicator. So, check that one out! But he' s there to help answer your questions along the way, specific to this particular class. Thanks to all of you for being here today. I' m filling in for Connie Hill, and we' re going to talk about zero days till expiration options, or 0DTE as the kids are calling it these days.
We' re going to jump into that. We' re going to talk about some of the characteristics. Maybe look at a couple of examples. We' re going to talk about some of the illustrative trades that can help us to understand the concepts and some of the considerations. So let' s do this. As we get into this discussion, a couple of quick housekeeping items: remember that everything we talk about simply for illustrative and educational purposes only. To constitute any kind of recommendation or endorsement of any particular security, pattern, or strategy. Remember that options carry a high level of risk. They are not suitable for all investors. Make sure that you understand the characteristics and risks of standardized options before considering any option strategy. Remember that with long options, investors may lose 100% or more of funds invested.
And we' ll talk about that or more part here in just a minute. Remember, the spread trading must be done in a margin account. Multiple leg option strategies entail multiple transaction costs. So just be aware of those. Now, there are a lot of different ways to look at the market. Probability analysis, technical analysis, fundamental analysis. All of those are theoretical in nature. None of them guarantee what' s going to happen in the future. Schwab doesn' t recommend the use of technical analysis as a sole means of investment research. We' re going to use the Thinkorswim desktop software platform today. The paper money application of which we' re going to focus on today. Great. It' s a trading environment, not however, a guarantee of future success out there in the real world.
And it doesn' To do things like facilitate the early assignment of short options that a live trading account would be. Remember, anytime you are short an option, there is the potential to be assigned that obligation that goes along with a short option. Now, we' re talking about long options today. I know that. I just wanted to remind you of that particular aspect of option contracts. Remember that investing involves risk, including the loss of principal. When you put on a stop order, there is no guarantee that the execution of a stop order or a stop limit order will be at or near the stop price. And in the event of a stop limit order, there is the potential that the order may not even fill because some of the characteristics of limit orders.
Now, as we jump into this discussion, it' s important to remember that past performance of any security or strategy doesn' t guarantee future results or success. And this is. Simply, again, for illustrative and educational purposes only. So, a quick rundown of our agenda: We' re going to talk about the concept of long options, specifically the idea of zero days to expiration or zero DTE options. We' re going to discuss the aspects or considerations of price, time, and volatility as they apply to zero DTE options. And we re going to look at some example trades on the paper money platform. Now, before we do that, before we jump into this. For those of you, yes, small gator, I do not like look like Connie Hill. I promise you, Connie is much better looking than I am.
Now, we' re going to talk a little bit about, again, the long options. I want to make sure everybody has a clear understanding, because if you are brand new to trading options and you' re just wandering in to this particular webcast and you start hearing the words zero DTE, your head might explode. I don' t want your head to explode. So I want to clarify what we' re talking about. And hopefully it will be some helpful information for you. If you are brand new to trading options, one thing that you might consider doing is jumping in to Barb Armstrong' s series of webcasts called Getting Started With Options. And I' ll let Cameron put the link to that playlist out there in the chat for those of you who are maybe just getting started with this.
But remember, long options, meaning long calls and long periods. Call options that we buy, put options that we buy to open the transaction. They are directional expectations. They have directional sensitivity. They require the stock to move a certain distance within a prescribed time frame in order for the trade to be profitable. So it doesn' t matter if that time frame is 45 days, 150 days, 365 days or zero days. There is a directional expectation with a long option. And time, unfortunately, as an option buyer, whether we' re buying a long call or whether we' re buying a long put, time is always working against us. But if you' ve got no more time left, then some other forces take over. And we' ll see what that looks like when we talk about zero DTE options as we get into this discussion.
Now, long options are also vega positive, which means that in. In. Increase in implied volatility generally tends to benefit the buyer of an option, tends to make those options become more expensive. And again, I said the theoretical max loss of a long option is the debit paid, the amount paid for the option. Now, there could be more. If you were to buy an option, hold it through expiration and be and be automatically exercised, meaning if it was a long call, turning that option into long shares of stock. And then the price of the stock were to move down, there is the potential for a greater loss. If you were long a put option and you held that option through expiration and that turned into an automatically exercised short position in the underlying stock, and the stock moved up, that could result in a greater loss than the initial debit paid for the option.
So we' re going to talk about some of the characteristics of options that may keep traders away from that type of scenario. OK, so let' s jump into this discussion. I' m going to switch over to the Thinkorswim platform here really quickly. And as I do so, this is a good reminder, a good reminder point for me to tell you: click on that subscribe button down at the bottom of the page. If you haven' t done so already, great way to stay connected to the Trader Talks Webcast channel. It' s at no cost to you. And if you like this webcast, click on the like button. Not only does that help me out, but it also helps bring this this great Schwab coaching content up to the top of your YouTube feed.
So let' s take a look at what' s going on here in the market as we look at the S&P 500. It' s been an interesting day. I started out this morning talking about trading futures. And we were looking at the market kind of running into a resistance level over the course of the day. It has started to move to the downside. We' re a little bit less than an hour to go until the closing bell of the cash market here, and so we Re- starting to see that SPX, the S&P 500, starting to continue, well, continuing to move to the downside. We see that RSI, the relative strength index, moving lower as well. If you want to learn more about technical indicators like the RSI, great.
The place to go is Cameron Mays, Getting Started with Technical Analysis or Advanced Charting Techniques webcast. I' ll let Cameron throw the links out there as well. Another great place to go to learn more about using technical analysis. Looking at the NASDAQ, the NASDAQ started up here at resistance. We saw a little bit of a gap up and then it' s sold off. It' s sitting right at the 50-period simple moving average at this particular point. So seeing some directional movement, the RSI. Backing off a little bit here. And we take a look at the Russell 2000, which is the small cap space, banging its head into this resistance once, twice, three, four times now, running into this resistance level. And the RSI kind of peeling off here a little bit.
Not a big move to the downside. Not a bearish engulfing candle like we see on the NASDAQ or on the SPX. But nevertheless, a gap up, a little bit of a gap up. And a sell-off today. So some weakness in the Russell 2000. So from a directional standpoint, we' ve got a short-term directional downward movement. That would benefit long put options if we' re taking advantage of that downward directional expectation. Now let' s look at one other thing here before we get into some specifics. I' m going to look really quickly here at the volatility index. I' m going to look at the VIX grid that I' ve created, which is simply a couple of different views of VIX.
Remember, VIX is the measurement of implied volatility across SPX index options looking back about 30 days and getting an average. And when those options become more expensive, the implication here is that there is activity going on that' s driving those option prices, i.e. Hedging activity generally, meaning puts are getting more expensive. So we saw this big ramp up in implied volatility in the VIX a couple of weeks ago, this big spike. And you start to see this bleed off here, and we' ve seen volatility bleed back down. But as the market has moved a little bit lower from that resistance level, we' re seeing that volatility is rising. In fact, it is touching or has touched today that 30-period average of volatility or VIX and kind of retreating a little bit from that.
So staying under the average. So staying under the average, but nevertheless testing it a little bit, right? Okay. John asks a question. Everybody nervous about Jackson Hole? That may be one of the reasons why. We' ve got the Jackson Hole Symposium for the Federal Reserve, the FOMC, at which Chairman Jay Powell is going to speak tomorrow and perhaps give some indication, more explicit indication, of potential changes to short-term interest rates. That has unnerved the market perhaps a bit today. Maybe that' s the reason. I don' t know. We don' t know what the market is reacting to. Could be that. And so we' re seeing a bit of uncertainty and maybe a little bit more of a continued move to the downside. Here' s the other thing to think about.
We can see the relationship here between VIX and the market. So this purple line is the SPX, the S&P 500. The candlesticks are going up. These are the VIX movements. And we can see that as VIX is rising or as the market' s pulling back, VIX is rising again. And that' s kind of the nature, kind of that opposite or inverse correlation. And you can see that the VIX has that inverse correlation almost about minus one. So almost an absolute inverse correlation here. It doesn' t always stay that way. We can see that they kind of move in concert in some cases. But more of the time, they typically tend to be opposite. One another. All right. Okay. So if implied volatility rises, that benefits us as the buyer of a long option.
So maybe looking at buying long put options might be a scenario. So I' m going to look at something here. And I' m going to go over to my monitor tab really quickly. And I' m going to pop in here to my long options group. And in my long options group, I have an option that expires tomorrow. Yeah. Right now, today, the market' s still open. This is not a zero days till expiration trade or a zero DTE trade. However, this option will be a zero DTE trade tomorrow. Right? All options, all options at the end of their lifespan become zero DTE options. Or zero days to go until expiration. It' s simply that term refers to an option in the last day of trading prior to its expiration.
So, in this particular case, this Apple long put option, which is in the money, bought it for $3. 25. It' s currently trading for $5. 27. It' s an in-the- money option. It' s got one day to go until expiration. Tomorrow, it will be a zero DTE option. But let' s go to the trade tab and let' s take a look at this particular option and see what its characteristics are. And that' s going to lead us into a little bit more of this discussion. So I went to the trade tab for Apple, and I' m looking at this put option that is about two strikes in the money. Right? Two strikes in the money. It' s the $2. 30 strike. Stock' s currently trading at $2.
24. Expectation is the price of the stock might continue to go down a little bit. We go back to that chart for just a second here. Let' s go to our single grid really quickly. And let' s take a look at Apple, AAPL. The stock might continue to go down. Right? Okay. Now, here' s the thing to think about. Generally, in looking at long options, we think about buying enough time so that time decay isn' t a problem. It isn' t decaying away faster than the price of the stock is moving and generating deltas. Does that make sense? Meaning there S always this constant battle. Directional movement versus time decay. Time decay inevitably at some point will generally win because time decay is inevitable. And it speeds up as we get towards expiration.
So, this option that we have, we' ll go back to the trade tab here. This option that we have has a theta component right now of about zero. And that' s really interesting because it' s going deep in the money. So, look at something here that you might find kind of interesting. This is a deep in the money option a day away from expiration. And yet, it has ... Zero time decay. Well, a little bit of time decay. It S bouncing back and forth as the market kind of settles out here. But it has very little time decay. Why? I' m going to ask you. Why does it have very little time decay? As we get close to expiration, we' re a day away from expiration, this is bouncing around between five cents of time decay and zero time decay. Okay. And I' ll give you a hint. I will give you a hint. The answer lies right here.
Now, if I were Donny Osmond and I were portraying the role of Joseph in Joseph and the Amazing Technicolor Dreamcoat, I might sing something like, The answer lies far away. Far from these walls. But it doesn' t. It' s right there. It' S at that 230 strike extrinsic value. Okay. Let me ask you a question to kind of help center this discussion. What kind of value decays away? What kind of value gets impacted by the passage of time? Is it ... Intrinsic value? Or is it extrinsic value? You' re close, Eva. You are close there in this discussion. Thank you, Gary. I appreciate that. Look, here' s the thing. This option has primarily intrinsic value. Remember, intrinsic value is simply the mathematical difference between ... the strike price and the stock price.
Right? Strike price and stock price. Extrinsic value is the only kind of value that So, okay. If that' s the case and you no longer have any or very, very little extrinsic value, do you care if it goes away? Probably not. So, David, you' re absolutely right. Extrinsic' s going away. It' s mostly delta. This has a delta. If we were to change our layout here really quickly. Let me change our layout and add delta into this mix. So let' s customize. And we' ll type in here delta. I' m going to add delta into the mix. This has an option that has about 95 cent delta. It' s running just about the same dollar for dollar movement as the price of the stock. It' s got very little extrinsic value.
So, I don' t care about theta. I know that, you know what, that last one cent or last two cents or last five cents is going to be gone tomorrow. Right? So now I have an option in the last stages before it expires that is entirely sensitive or almost entirely sensitive to directional stock movement. Oh. However, there is a risk here. I want to show you something. Okay. I want to show you something. This option Greek right here, gamma, is what comes into play when we start playing in the realm of zero DTE. Because, well, okay. Somebody. One of you tell me. One of you tell me what gamma measures. If you remember from basic options, you Ve maybe heard it from me in a workshop. You might have heard it from Cameron. You might have heard it from Barb Armstrong. What does gamma measure? What does gamma measure or give us a sense of?
All right, if that' s not the answer, I can' t hear you. I will try. Didn' t bring the arguments to the world so I can hear it. I' ll pick up the dens and count to eight. All right. So there, what does gamma measure or give us a sense of? Of. all right i' ll give you a hint gamma okay nuresh close vega measures volatility sensitivity gamma measures the rate of change of delta okay so here The thing remember an at-the- money option generally has a delta of about 50 cents, which means the price of the stock could go up or down a little bit and it could put that option that' s at-the- money strike in the money or out of the money really quickly.
Right, so gamma increases as we get closer to expiration because because the directional price movement of the stock could put that option up or down a little bit and it could put that option up or down a little bit in the money or out of the money very quickly. But gamma doesn' t play equally across all strike prices; notice that as we get far out of the money, gamma is near zero. M sorry as we get far in the money, gamma is near zero. As we get far out of the money, gamma is near zero. But these strike prices kind of right here around the at-the- money option are going to be very very with the at-the- money strike having the greatest amount of gamma.
It' s poised on a knife edge, so gamma or the the chart of gamma oftentimes looks like this with this being the at-the- money strike, gamma is high at the at-the- money and it falls off quickly as you go out or in the money strike, because the price of the stock could move down or could move up and if you' ve got no more extrinsic value left, right if you Ve got no more extrinsic value left, the only thing then that starts to change is intrinsic because of the movement of the price of the stock. Oh, okay this is a one of the big considerations in trading at the money options number one and number two, trading zero DTE options.
So let me show you how you can see this and you' re right David, this looks like a butterfly spread for those of you who are familiar with that type of spread, guess what it is exactly? For that reason why a butterfly spread looks this way or a calendar spread looks this way, it is because of that potential spread and it' s because of that potential spread for price movement one way or the other off of that very small target. Let me show you something I m going to show you a tool here on the Thinkorswim platform that can be helpful to visualize this. We know that this option, the 23 Aug expiration has one day to go until expiration I' m going to come down here to the section titled ' Product Depth' and I' m going to take this and I' m going to say I want to see gamma I don' t want to see all 21 expiration series but I want to see the one that expires tomorrow.
Okay, so now that I have that in place notice the shape of this gamma profile: calls on the left, puts on the right. This number on the left- hand axis: 0. 11 or 0. 12 is the gamma sensitivity, the price down here or this number down here across the x-axis on both of these charts is the price of the stock, stock' s currently trading at roughly 225 that' s the at-the- money strike you can see that that has the greatest amount of gamma now before we leave this I' m going to change I' m going to go right here to these series I' m going to click and I' m going to go out to one that is maybe what 35- 45 days to go until expiration let' s go out to this one that' s the at-the- money strike and I' m going to go out to the at-the- money strike
it' s the 18th of October and I' m going to click on that one and I' m going to add that to the mix here we are 45 days to go until expiration, here we are in the purple or pink line that One day to go till expiration, Gamma is low and widely spread across all strike prices. Gamma is high close to expiration and centered on the at-the- money strike. Does that make sense? Is that a helpful tool to be able to visualize Gamma risk going into expiration? So when we talk about buying an option with a long distance to go until expiration, Gamma is not a big concern necessarily, but if we Re buying an option close to expiration, gamma becomes the bigger driver.
Let me show you what happens to theta as we do those two similar types of circumstances. Theta is slow far away from expiration; data is fast close to expiration, but if you' re deep in the money or deep out of the money there' s no more extrinsic so this doesn' t matter as much as gamma does. So we' re going to pay attention to gamma as we get to zero DTE now let' s kind of walk through a scenario here. Okay, I' m going to go to the charts and I' m going to pull up a stock, this is XSP and the reason I' m going to pull up XSP is because I' m going to pull up a stock and I' m going to pull up XSP, which is the mini S&P 500 index.
Now we could use SPX that' s the big index but I' m going to use XSP which is the one-tenth of the index size and if I go to the trade tab for XSP there Something you notice here, anybody notice anything unusual about XSP versus a just a regular XSP equity? Oh zero one four five six seven eight twelve thirteen fourteen fifteen eighteen days, nineteen days, twenty days to go until expiration. 21 days to go until expiration. There are expirations nearly every single day, Monday through Friday on XSP. So if you are a Zero DTE trader (Zero DTE is something that you are considering trading). Oh, this is an instrument again, not a recommendation but this has daily expirations so there is an option that expires today it' s Thursday, there' s an option that expires Thursday that This one right here, and we could look at that trade now.
We' re less than we' re about half an hour to go until expiration or till close of trading today, and I will tell you this: in terms of the pantheon of trading zero DTE options, it might be too late in the day to put the trade on now. There are some traders that try to scalp those last few minutes; that' s not what we' re doing in this discussion, okay? But but we can look at the relationship between an option that expires today versus an option that expires tomorrow. So what I' m going to do is I' m going to come back down, I' m going to close this out, and I' m going to come back down to that uh today's job.
s options statistics down at the bottom and that product depth and i' m going to look at the gamma profile for an option that expires today versus an option that expires tomorrow one day' s difference right so i' m going to change my series here i' m going to deselect all series and i' m going to go to the one that expires on the 20th and then i' m going to go to the one that 22nd of August and the one that expires on the 23rd of August. Look at the difference in gamma. What a difference a day makes, right? What a difference a day makes in terms of that gamma profile. Gamma goes at an at the money strike. So the index is trading right now at 556.
So let' s put our line right here at 556. That' s our at the money strike. On the put option side, the gamma goes from an option that expires tomorrow at 0 . 7 or 0 . 07 to an option that has a gamma, same strike price, expires today, 0 . 34. That is balanced on the knife edge. That at the option could go in the money, could go out of the money very, very quickly. And the price can change significantly. So, okay. Magnolia, we' re getting there. We' re going to get there. So here' s the thing to think about. If we are looking at trading, if a trader is looking at trading a zero DTE option, right? Zero days to go until expiration.
Because of that directional consideration, one thing to think about is buying a little bit further in the money to eliminate as much as possible that gamma risk, or on the other side, because remember, look, if the price of the stock goes up, that gamma risk also falls off. So we could buy a little bit further out of the money. If we have an expectation that the price of the stock is going to make a move, cost is going to be less, but the probability of success is going to be lower as well, because the debt is going to be lower. So we' re going to have to delta is lower. So let' s think about this as we go into this. Now, Magnolia asks you a great question.
Explain the risks of an option that expires if it goes in the money. If that option expires in the money, then in all likelihood, what' s going to happen is that that right that you have when you buy that option is going to be automatically exercised. And you' re going to end up with a long position in the underlying stock. If you don' t have the cash in your account, then the theoretical process would be buying the stock, turning around and selling the stock, and you would end up with cash in your account. Now, here' s the thing. XSP is an index option, which means it settles to cash, not, not the underlying stock. So it s a cash- settled instrument, meaning you don' t have that overnight risk or the over the weekend risk in that settlement, which is one of the reasons why XSP and SPX become popular instruments for trading zero DTE options.
Okay. So let' s see how we might go about putting this trade on with that expectation of bearish directional movement. And as I do this, we' re going to come back to, the chart. I' m going to open up the left-hand side and we' re going to talk through maybe some ideas to consider, right? As we put this together. So directional expectation down in this particular case, right? We Re going to look for that directional consideration, that directional move to the downside. Okay. So that would mean a, a long foot, right? Okay. This is highly liquid. This trades with a lot of volume. It' s got Z, it' s got expirations every single day. So one of the things we might consider is time of entry.
And that might be early in the day. Okay. Maybe the first one to two hours of the trading day, once that direction starts to become clear, right? Then entry, we might base on a break of say, for instance, a support level, or, or using some other kind of technical indicator like the RSI or the Mac D. So we might make a technical entry based on an indicator, for instance. Okay. And volatility low and rising, because that benefits us as, as the buyer of an option, right? So here' s what we' ve got so far. Our directional expectation here in this case is down. Time of entry early in the day. Entry based on technical indicators, volatility low and rising. Okay. So now what we might think about is buying long put, or buying long put.
Two to three strikes. In the money. Why two to three strikes in the money? Let' s go to the trade tab. Let' s go back up to our expiration. We' re going to go to the 23 OGG. That' s tomorrow and we' re going to see what that looks like. So we' re going to buy a long put. We' re going to look at a long put potentially. So I' m going to filter this off to just that foot side. Okay. And And so I' m going to look at a long put that might be two or three strikes in the money. And so we' re going to look at how much extrinsic value that has. And as we get two or three strikes in the money, or two or three strikes out of the money, the amount of extrinsic value begins to fall off significantly. So it means less can decay away. Because we know at expiration, on the date of expiration, there is no more extrinsic value. It' s only intrinsic. So theta is going to go from $1. 23 to near zero. Okay? So now we think about this and putting this trade on. And in terms of managing the trade,
by by setting a target of 50 to 100% of premium paid. Okay? So setting a target of 50 to 100% of premium paid and a time stop whoops to exit prior to the last hour of trading so that we don' t get caught in that circumstance of taking this trade into expiration. Okay? So let' s put this trade together. Directional expectation for tomorrow, in this particular case, based on what we' re looking at, at the moment, technically is down. But it might change. So we' re going to take this and put this on based on what we' Re seeing now in this example from a technical analysis perspective. I' m going to go to the $5. 58 strike. The expectation is the price of the stock or the price of the market is going to continue to go to the downside.
So we' re going to look at buying that $5. 58 long put and expecting that it' s going to go down. That the price is going to go down. So we' re going to go to the $5. 58, and what we' re going to do is we' re actually going to create this. Let me delete this really quick. I' m going to go to that $5. 58. I' m going to right-click and create a buy custom with OCO bracket. Okay? So if we' re paying $2. 92, I want to get out. We' ll call that, let' s see, what' s $2.92? $2. 92 plus 50% is $1. 46, $4. 38. So I want to get out if that option trades for $4.
38. I also want to get out if the option trades at, let' s call it $1. 50, which is about half of what we paid for it. I' m going to make that good till canceled, good till canceled. And we' re going to look at entering this trade based on this idea, right? Stop it, get out if it goes to $4. 38, get out if it goes to $1. 50. Remember, one' s a limit order, one' s a stop order. Stop orders don' t guarantee the price at which we, that order gets executed. So I' m going to create this order, clicking on confirm and send, read through it, make sure that we We are aware of it, and we' re aware of any, any alerts that exist here. We' re going to place this order now, because I want to see how this works, but we may consider a trader trading zero DT options, may consider putting this trade on early in the morning once that directional expectation starts to play itself out. All right. So those are some of the considerations in, in terms of kind of this zero DTE idea. So think about this. We' re not going to adjust.
It is what it is. Right? We' ve got very little time for this trade to play itself out. So we' re not going to adjust it. We' re not going to roll it. We' re not, we. Re leaving this trade for what it is. Number one, and number two, cut losses quickly. Exit if the direction still is, starts to move against us because gamma is gonna get you, right? Because if this starts going against you, that gamma is gonna start working against that trade very quickly. Gamma is gonna get you. There you go. Gamma is gonna get you if you don' t consider exiting that trade quickly. Now, think about this, Harry. You ask a great question. At what time in the morning should we look at the market to have a stable direction?
Your mileage might vary, but you think about that first 30 minutes to an hour being a little bit uncertain, perhaps, right? As trades start to get thrown around and moved around and traders assess the direction and the news of the day. So it' s no guarantee that that' s gonna be the direction that holds because news can happen at any point. But that gives you a point at which maybe some of the early news has come in and traders have taken a directional bet, okay? Now, John asks the question, so max profit is that in this particular case, is it the target of $4. 38? In other words, what we' re paying for the trade, we pay $4. 38. So we' re paying $4. 38.
So we' re paying $4. 38. $2. 92. So we' re paying $4. 38. $2 . 92. So we' Ve put in an order here to exit at $4. 38. So $4. 38 minus $2. 92. Our gain in the trade, theoretically, is $1. 46. Now, we could change that limit order and exit that trade. Uh, you know, we could give it 100%, right? But the important thing is, if the stock, moves throughout the course of the day, and that gamma, because that gamma is large, drives that price of the option, because the stock starts to move and then comes back, because we get some wild swings throughout the day, or implied volatility rises, then having a limit order could take the trade off and get a trader out with some profit on the trade.
These are not home run trades, uh, like just a long call or a long put over a longer period of time, right? Okay. So I' m buying in the money because I want intrinsic value to be able to sell back to somebody else, Magnolia, uh, close to expiration. I' m not going to hold it to expiration. That' s why we have this time stop in mind to exit prior to the last hour of trading. Number one, and number two, this is, this is a product I XSP or SPX that is cash settled. And so gets us to that point where it, there is less of that risk of taking on a position that has overnight directional risk, if that makes sense. All right. So that' s where we' re getting to in this idea.
So just kind of quickly review this. Yeah. And again, get a directional expectation, time your entry to early in the day, enter based on a technical condition, look for low and rising volatility, uh, look at buying one to two strikes or two to three strikes in the money, manage the trade by setting a target, uh, have a time stop. Don' t adjust the trade, cut losses quickly. Thinking about those again, these are just considerations. This is not a rule of thumb. These are not absolute hard and fast set. And stone rules, but something to consider guys. If you want to learn more about this, you can pop over here to the webcasts and type in zero D T E.' And I' ve talked about selling zero D T E vertical spreads.
Uh, Brent Morris has talked about zero D T E options, expiration considerations of zero D T E buying zero D T E verticals. So there' s a lot of different resources that you can use to buy zero D T E verticals. So there' s a lot of different things you can use for this particular strategy. Guys, thank you very much for joining me for this webcast. My thanks to Cameron May for helping to answer questions out there in the chat. And of course, uh, my thanks to our production staff for helping out as well. You can follow me on X at BenWatsonCS. You follow Cameron at CameronMayCS. Thanks again. We will see you again very soon. Have a great day, everybody. Take care. Bye-bye.
