Options Education
Learn to Trade 0DTE Options Contracts
A complete guide to understanding, reading, and executing 0DTE option contracts — from the basics to placing your first trade.
Section 1
Understanding Option Contracts
Before you place a trade, you need to understand what you are actually buying.
What is an Option Contract?
An option contract gives you the right — but not the obligation — to buy or sell 100 shares of a stock at a specific price, before a set expiration date. You pay a premium upfront for that right. On standard brokerage platforms, one contract always controls exactly 100 shares.
You believe the stock will go UP. A call gives you the right to buy 100 shares at the strike price. Profit when the stock rises above your strike.
You believe the stock will go DOWN. A put gives you the right to sell 100 shares at the strike price. Profit when the stock falls below your strike.
Key Terms You Must Know
The agreed price at which you can buy (call) or sell (put) the stock. Hood Option always targets the ATM (At-The-Money) strike — the strike closest to the current stock price.
Example: SPY is at $737. The ATM strike is $737.
0DTE means the contract expires TODAY — the same trading day you buy it. These are the highest-risk, highest-reward contracts available. If the stock doesn't move your way before market close (4:00 PM ET), the contract expires worthless.
Example: 0DTE expires at 4:00 PM ET the same day.
The price you pay for the contract. Hood Option shows this as "Premium per Share." Because one contract = 100 shares, multiply by 100 to get your total cost. This is your maximum possible loss.
Example: Premium $2.10/share × 100 = $210 contract cost.
In-The-Money (ITM) = favorable strike. At-The-Money (ATM) = strike equals current price. Out-of-The-Money (OTM) = unfavorable strike. Hood Option targets ATM for the best balance of cost and probability.
Example: SPY at $737 → $737 strike = ATM.
⚠️ 0DTE Risk Warning
0DTE contracts are the most speculative options available. They move extremely fast — a small stock movement can double or zero out your contract within minutes. Only risk money you can afford to lose entirely. Most traders limit each 0DTE trade to 1–5% of their total portfolio.
Section 2
Reading the Hood Option Dashboard
Every signal card on the Market Tracker tells a complete story. Here's how to read it.
Example Signal Card — SPY
S&P 500 ETF · Major ETF
75%
Confidence
The overall bias — CALL (bullish), PUT (bearish), or NEUTRAL. Only trade in the signal direction.
Percentage of technical conditions met. 75%+ = worth considering. Below 60% = skip the trade.
Volume-Weighted Average Price — the most important intraday benchmark. Price above VWAP = bullish bias. Price below = bearish.
Where the price sits in today's high/low range. Below 30% = potential bounce (CALL). Above 70% = potential reversal (PUT).
Reading a Trade Suggestion
Entry Price
$737.62
Current stock price when signal fired. Buy your option near this price.
Stock Target
$740.57
The stock price you need to reach for the option to gain ~20% in value.
Strike
~$738 ATM
The option strike to select in your brokerage app — always the closest ATM strike.
Prem / Share
$2.21
Estimated premium per share. This is what the option costs before ×100.
Contract Cost
$221.00
Your total cost for 1 contract (premium × 100). This is your max loss.
+20% Target
$265.20
Sell your contract when it reaches this value — your profit target.
Section 2B
How Signal Confidence Is Calculated
The confidence percentage is not a guess — it is a precise score derived from four technical conditions evaluated in real time. Here is exactly how it works.
The Formula
Every signal checks up to four conditions. Each one either passes or fails. The confidence score is simply the fraction of conditions that pass, expressed as a percentage.
Confidence Formula
Confidence = (Conditions Passed ÷ Total Conditions) × 100
Example: 3 out of 4 pass → 75% confidence
100%
4 / 4 pass
PRIME SIGNAL
All conditions met. Signal fires as CALL or PUT.
75%
3 / 4 pass
STRONG
Worth watching. Signal shows NEUTRAL but bias is clear.
50%
2 / 4 pass
BORDERLINE
Directional bias exists but confirmation is weak. Use caution.
0%
No bias
NEUTRAL
Price is not clearly above or below VWAP and open. No trade.
The Four Conditions
A separate set of four conditions is evaluated for each potential CALL and PUT direction. Conditions 1 and 2 determine direction; conditions 3 and 4 filter for quality entry timing.
VWAP (Volume-Weighted Average Price) is calculated as (High + Low + Close) ÷ 3. Price above VWAP means buyers are in control for the day. This condition always passes when a bullish bias is detected.
c > vwap
The opening price is used as a proxy for the 8-period EMA trend. Price holding above the open signals that the intraday uptrend is intact. This condition always passes for a CALL signal.
c > open
Range Position = (Current Price − Day Low) ÷ (Day High − Day Low) × 100. Below 30% means the stock has pulled back toward its daily low while remaining in an uptrend — a better entry point with more upside room.
rangePos < 30
The percentage distance between current price and VWAP. The closer the price is to VWAP, the lower the risk of buying at an extended level. Entries far from VWAP (>1.5%) have a higher chance of mean-reverting against you.
abs((c − vwap) ÷ vwap) × 100 < 1.5
The PUT evaluation uses the exact same four conditions with inverted logic:
Worked Example — 75% CALL Signal
Here is how the engine scores a real-world scenario with AAPL trading at $294.80 intraday.
Current Price
$294.80
Day Open
$292.56
VWAP
$294.21
Day High
$295.27
Day Low
$292.56
Range Pos
82.7%
Result
3 of 4 conditions passed → signal shows NEUTRAL (not all pass), but the underlying direction is CALL with 75% confidence.
75%
3 ÷ 4 × 100
How to Use Confidence in Your Trading
All four conditions pass. The signal fires as CALL or PUT and triggers the prime ribbon on the card plus an audio alert. This is the highest-quality setup Hood Option can produce — the one worth acting on.
Three conditions pass. The signal shows NEUTRAL (because not all four pass) but the direction and score are visible in the card. Many experienced traders wait for 100% and skip 75% setups, but 75% with a strong day's trend can still be a solid trade.
Only the two direction-defining conditions pass. The market has a directional lean but lacks confirmation from the timing filters. Avoid trading on 50% signals alone — wait for a higher score or additional confirmation.
Price is caught between VWAP and the open — neither clearly bullish nor bearish. The signal shows NEUTRAL with 0% confidence. Sit on your hands and wait for a clearer setup.
Section 3
How to Buy & Sell a 0DTE Options Contract
Follow these steps when placing a 0DTE options trade. Steps are illustrated using a typical mobile brokerage app flow.
Find the stock
Search for the ticker from your signal card
SPY
SPDR S&P 500 ETF Trust
$737.62
+$6.04 (0.83%)
Open the options chain
Tap Trade → Options on the stock page
SPDR S&P 500 ETF
$737.62
Buy
Sell
Options →
Select today's expiration
Always choose the current date for 0DTE trades
Select Expiration
May 10 (Today)
✓ 0DTEMay 17
May 24
Jun 20
Choose Call or Put
Match the contract type to your Hood Option signal direction
Select Type
Call ✓
Put
Signal says CALL → select Call
Select the ATM strike
Pick the strike price closest to the current stock price
Strike Price (Calls)
$735
ITM
$3.80
$737
ATM ✓
$2.21
$740
OTM
$0.95
Set quantity to 1 contract and review
Start with 1 contract until you are comfortable with how options move
Order Review
Submit Order
Sell to close — don't wait for expiry
Sell your contract when it hits the +20% target or if the trade goes against you
My Positions
SPY $737 Call
Exp: Today · 1 contract
+$44.20
+20.0%
Sell to Close →
⚡ Pro Tips for 0DTE Trades
Only trade between 9:45–11:30 AM and 2:00–3:30 PM ET
These windows have the best price action. Avoid the first 15 minutes and the last 30 minutes.
Use limit orders, not market orders
Options spreads can be wide. Set a limit price between the bid and ask to avoid overpaying.
Set a hard stop at −50%
If your contract loses half its value, sell immediately. Don't hope for a recovery on 0DTE.
Never hold a 0DTE past 3:30 PM ET
Time decay (theta) accelerates exponentially in the last 30 minutes. Exit early.
Ready to Trade?
Put your knowledge to work
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