A 0DTE covered call is a position where you hold shares of an underlying (for example SPY) and sell same-day call options against that position. The goal is to collect intraday time decay while using the stock position as collateral.
Basic Framework
- Hold 100 shares of the underlying for each call you plan to sell.
- On selected days, sell an at-the-money or slightly out-of-the-money 0DTE call.
- Let the position evolve through the session based on pre-defined rules.
Typical Outcomes by the Close
- Call expires out-of-the-money: you keep the premium and retain the shares.
- Call expires in-the-money but close to the strike: you may choose to buy back the call and resell a new one next session.
- Call expires deep in-the-money: you allow assignment, selling shares at the strike and potentially re-entering on a later date.
Risk Management Ideas
- Trade smaller than you think you can “tolerate.”
- Avoid selling calls directly into major scheduled news if your plan is conservative.
- Cap daily losses in cash terms, not in percentage of premium sold.
Covered calls can reduce some downside but do not remove equity risk. 0DTE covered calls compress outcomes into one session and should be tested and sized carefully.