0DTE Selling Puts on SPY: Daily Income Strategy

Selling 0DTE puts on SPY is one of the most popular daily income strategies. The market's long-term upward bias, combined with put premium being structurally overpriced due to demand for downside protection, creates a persistent edge for disciplined put sellers.

The Two Approaches

Approach 1: Naked (Cash-Secured) 0DTE Puts

You sell a single put, secured by cash in your account equal to 100 shares at the strike price.

Example: SPY at $545. Sell the $541 put (10 delta) for $0.35.

  • Credit received: $35
  • Cash required: $54,100
  • Return on capital: 0.065% per day
  • Annualized (250 trading days): ~16%

    • Pros: Simple, no spread cost, full premium collected. Cons: Enormous capital requirement, assignment risk (you own shares if SPY drops below $541).

    Approach 2: 0DTE Put Credit Spreads

    Sell a put and buy a lower-strike put for protection. This requires far less capital.

    Example: SPY at $545. Sell the $541/$540 put spread for $0.12.

  • Credit received: $12
  • Capital required: $88 per spread (max loss $88)
  • Return on capital at risk: 13.6% per trade
  • Win rate (backtested): ~83%

    • Pros: Defined risk, much less capital required, can trade multiple contracts. Cons: Lower dollar credit, spread costs reduce net premium.

    Which Approach Is Better?

    For most traders, put credit spreads are superior for 0DTE trading:

    | Factor | Naked Puts | Put Spreads | Capital efficiencyPoor ($54K per contract)Excellent ($88–$500 per spread) Risk managementUndefined downsideDefined max loss Return on capital0.06%/day5–13%/trade Assignment riskYesManageable ScalabilityLimited by capitalHighly scalable

    The only scenario where naked puts make sense is if you genuinely want to own SPY shares at a discount and have the capital sitting idle.

    Strike Selection: The Delta Framework

    Your short put's delta determines the probability of the trade working:

    Short Put DeltaDistance from Current PriceWin RateAverage Credit ($1-wide) 5 delta~1.5% OTM90–92%$0.06–$0.10 10 delta~1.0% OTM83–87%$0.10–$0.18 16 delta~0.7% OTM78–82%$0.18–$0.30 | 20 delta | ~0.5% OTM | 72–76% | $0.25–$0.40 |

    The sweet spot is 10–16 delta. Lower deltas have higher win rates but collect tiny premiums that don't justify the risk. Higher deltas collect more premium but win less frequently.

    Entry Rules

    Time: 9:50–10:30 AM ET. Early enough to capture maximum theta, late enough for spreads to normalize.

    Market condition check:

  • VIX above 13: Sufficient premium to sell
  • SPY above its 20-day moving average: Upward bias intact
  • No major economic reports remaining in the session

    • Mechanical entry: Sell the put at the 10-delta strike. Buy the put $1 below. Collect whatever the market gives you — don't try to time the "perfect" entry.

    Exit Rules

    Profit target: Close at 50% of credit received. This typically happens between 1:00–3:00 PM.

    Stop loss: Close if the spread reaches 2x credit received. If you collected $0.15, close at $0.30.

    Hard close: Close all positions by 3:45 PM regardless of P&L. Last-minute gamma risk isn't worth the remaining pennies.

    Sizing for Daily Income

    If your goal is $100/day from 0DTE put selling:

    | Account Size | Spreads Needed | Daily Risk | Strategy | $25,0008–10 ($1-wide)$640–$800Aggressive $50,0008–10 ($1-wide)$640–$800Moderate | $100,000 | 8–10 ($1-wide) | $640–$800 | Conservative |

    Notice the number of spreads needed is similar regardless of account size — the difference is risk as a percentage of capital. A $25,000 account risking $800 is taking on 3.2% risk per day, which is the upper limit of prudent sizing.

    Long-Term Performance

    Backtesting daily 10-delta put credit spreads on SPY from 2022–2025 using OptionsPilot:

  • Annual return on capital at risk: 45–65%
  • Annual return on total account (conservative sizing): 15–25%
  • Max drawdown: 12%
  • Worst single month: -6.2% (September 2022)
  • Best single month: +8.1%
  • Sharpe ratio: 1.6

    • The strategy works because of the structural edge in selling puts. Markets go up more often than down, and put premium is consistently overpriced relative to realized moves.