r/options
0DTE SPX Iron Condor Study
Study shows 0DTE SPX Iron Condors yield ~3.3% more credit with passive mid-fills vs crossing the spread, a stable edge.
I recently made a post offering to do some basic research for folks for two reasons:
- to try and get more people interested in doing research for themselves
- because i spend most of my time researching and now with AI its pretty quick.
u/Fit\_Equal6932 had asked:
If you have the data. Here is one for fun and also because it is a popular topic. How would PnL change for 0dte iron condors if you were to get filled passively vs crossing the spread? Assume whatever mechanistic entries you want. The OPRA quotes data is huge and it will probably take me many weeks to process this from massive. If you can run this it will be good. It will give some insights into how good the MM pricing is, whether the fair lies within the spread most of the time so that probabilistically the strategy can perform a lot better with passive fills (getting those fills is another matter of course and so this is still mostly academic). Running this over a longer time horizon (just the weekly expiry for when true 0dte was not available) could also tease out affects like whether the popularity of this strategy has distorted pricing with huge volumes of retail trading this every day and selling into bids from MMs.
here is the summary to their Q:
0DTE IC Passive vs Cross Fills SPX, 2022-2026 (i used the date range for 0DTEs)
filling passively at mid instead of crossing is worth \~$18.45 per 1-lot iron condor 3.3% of the \~$587 credit (primary config: 10:00 ET entry, \~16 shorts, 50-pt wings, held to PM settle).
It's real but modest and it has not eroded over the true-0DTE era (flat at 3.0-3.5% every year).
https://preview.redd.it/1dd7prtqby6h1.png?width=2086&format=png&auto=webp&s=2ad12d7ac8cdcae9fa4925db0d1b577f8286bf01
https://preview.redd.it/dkx6r9vrby6h1.png?width=2086&format=png&auto=webp&s=7e81549f4a7b03576aeb1c1ba491b4a2a98f2147
Unless your paying for to the second backtesting data your backtests will ALWAYS be inaccurate. Unless you run no stops. Most backtesting data is to the minute, and we all know real world you can dip 20 points and recover it within a minute very easily.
doesnt really impact this that much. backtesting will never fully replicate future - but it's a really useful tool that gets you pretty damn close if done well.
Don't trade 0DTE! A good article that explains how risky is 0DTE trading: https://www.myoptionsedge.com/blog/why-avoiding-0dte-options-is-a-smart-move-for-traders
This is fantastic work, u/esInvests, and a really insightful study on a highly popular (and often debated) strategy! Thanks for taking the time to dive into the data and share these findings.
The core takeaway that passively filling 0DTE SPX Iron Condors at mid can be worth approximately 3.3% of the credit per 1-lot is a concrete and valuable insight. The consistency of this edge, remaining flat at 3.0-3.5% annually across the true 0DTE era (2022-2026), is particularly compelling. It suggests that while the edge is modest, it's also persistent, which speaks to the underlying mechanics and market maker behavior in this high-volume environment.
This kind of rigorous, data-driven research is exactly what helps traders move beyond anecdotes and truly understand the nuances of their strategies. It reinforces the importance of:
- Order Entry Discipline: While achieving mid-price fills is indeed "another matter," recognizing the quantifiable benefit helps emphasize why traders should always strive for passive fills where possible, especially in high-frequency products like 0DTE SPX.
- Market Structure Understanding: The fact that this edge hasn't eroded over time, despite the massive popularity and volume in 0DTEs, indicates a robust and efficient pricing mechanism by market makers. It challenges the notion that increased retail participation automatically "distorts" pricing in a way that eliminates these small, persistent edges.
- The Value of Small Edges: In high-frequency, high-volume strategies, even a 3.3% improvement can compound significantly over many trades. It highlights that continuous optimization of execution can be a significant alpha source.
Thank you again for contributing this; it's exactly the kind of "real content" that elevates the discussion in the options community. The attached charts clearly illustrate the cumulative P&L difference, making the academic point very tangible. Well done!
Great info. What are you using for your backtesting data?
this is my own dataset from datastreaming mixed with ORATS, UW, and Polygon (Massive) - I synthesized all four
real talk, this is solid. more people need to hear this.
The fill assumption is the whole study. A backtest that assumes midpoint fills and a live strategy that crosses the spread are basically different strategies.
I would separate results into at least three buckets: midpoint theoretical, passive fill with realistic non-fill rate, and crossing spread. Then compare not just PnL, but trade count, missed winners, filled losers, and time-in-market. For 0DTE, execution quality is not a detail; it is part of the edge.
I did short IC on same day expiration SPY options. Not a bad idea, but not sure if it is worth the hassle. You lose once a week, which takes all your weekly profits
I mean, not to discount your likely plausible results, I just don't quite get this dilemma to begin with.
IC's can be simply backtested empirically for alpha. You either have an edge or you don't. Same with any other option strategy for that matter. Data is king. More of it the better.
i tried iron condors on spx. it worked for a while until it didn’t and i lost a lot of money in one trade.
When was this? What strikes and DTE?
it was last year, I sold 0DTE iron condors. I determined strikes as a certain percentage from the spot price at the time, which now I know was a mistake. I think determining strikes based on Charm exposures if you have the data would be more successful. If you don't have access to Exposures data, I think another way would be selling strikes outside of 1st standard deviation, since statistically 68% of the days price should not go outside of 1 standard deviation. I stopped doing that is because I would be green for 5 days, and then 1 red day would wipe out all my profits for previous 5 days just because of the profit to risk ratio. I am not doing it currently because of these constant news candles. B/c Trump tweets something and all of the sudden there is a giant news candle.
I am not saying never do it, I am just saying that risk to reward ratio is very tricky. Or may be just stay out of the trade during elevated IV environments, I don't know...
When you sell them in the morning though, premiums are juice since IV is always elevated in the morning.
I tried a short iron condor last week on INTC that has decent IV to make it worthwhile. It was an annoyingly bad trade as it was blah until today when it surged %10 and cost me a small amount to close at a loss. For it to work would need super unusual conditions. A highly volatile stock that is range bound for a period of time. I will avoid this one going forward.
Cool!