Stock Market Options Trading 173: What the 0DTE Trend Spread Engine Is Already Revealing
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Jan 5, 2026 They dig into a new Trend Spread Engine that scans five-minute trends and recommends credit spread setups. Timing and strike construction are highlighted with concrete trade examples. Early backtests reveal surprising midday hotspots, especially around lunch hour entries. The conversation focuses on time-of-day edges and how frequent interval posting surfaces potential trading advantages.
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How The Trend Spread Engine Operates
- The Trend Spread Engine (TSE) classifies 5-minute SPX trend every 15 minutes and posts two zero-day credit spread ideas aligned with that microtrend.
- It posts a Delta-20 five-point wide and a Delta-15 ten-point wide spread between 10:00 and 15:00 ET to capture theta while acknowledging gamma risk.
Theta Focus Means Wider OTM Short Strikes
- The TSE deliberately uses out-of-the-money strikes to harvest theta on zero-day spreads while accepting higher gamma risk.
- Five-wide targets Delta-20 (higher premium, lower win probability) versus ten-wide Delta-15 (farther OTM, higher win rate).
Concrete 10:00 Trade Example Today
- Eric gave a live example: at 10:00 SPX was ~6886.96 with an up trend and the TSE suggested a 6885/6865 put spread and a 6860/6850 ten-wide further out.
- This illustrated how the engine chooses short strikes around Delta-20 and Delta-15 at entry.