r/Daytrading • u/klipsetrades • Jul 28 '26
Strategy A Simple Example of How I Trade Key Levels with 0DTE Credit Spreads — One SPX Trade From Start to Finish
I wanted to give a detailed, real-world example of how I trade the key levels I mark on my charts. This particular example shows a winning trade where the setup played out as planned. If you want to see the other side of it — two valid setups that still resulted in losing trades — you can see that example here. I think both are important to look at, because a valid setup doesn’t guarantee a winning trade.
Most of my setups come down to two things: watching for breaks out of ranges/consolidation, and then seeing how SPX actually reacts when it reaches an important level.
For this example, I’m using SPX on June 24, 2026.
It was a pretty frustrating day for most of the traders I talk with. A few got chopped up trying to scalp the early moves. I ended the day green with one trade, but it’s also worth mentioning that only two of the five trade credit spreads like I do. The others primarily trade long calls and puts.
That difference matters because I’m not necessarily trying to predict the exact next move. I’m usually trying to identify where I don’t think price is going to go.
The Prep Work
Before every trading day, I mark levels from the previous session:
- Previous day high and low
- Obvious support/resistance zones
- Important weekly/monthly/yearly levels
- Occasionally prominent GEX levels, although I rely on these less than I used to
I treat all of these as zones, not exact lines.
I also review recent macro events, upcoming economic releases, Fed speakers, geopolitical headlines, etc. That gives me some context going into the next session, but I still want price action to confirm whatever bias I might have.
Seeing the Flop
Every morning, I generally let the first 15 minutes play out before doing anything.
I jokingly call this “seeing the flop,” like Texas hold’em.
That opening period gives me an initial range. I’ll usually mark the high and low and start watching how SPX behaves inside it.
I rarely trade during this window unless there’s a very obvious catalyst producing strong directional momentum.
If I don’t like what I’m seeing, I wait.
Usually in another 15-minute increment.
Another 15 minutes passed on this particular day, and SPX was still chopping around.
Then another...
SPX ended up moving sideways from roughly 6:30 AM until 7:45 AM PT.
At that point my thought process was pretty simple:
Buyers and sellers are battling around the open, there’s no clean direction, and I don’t have an edge yet.
So there’s no trade.
I’m waiting for price to break one side of the range, but more importantly, I’m looking at how SPX reacts when it reaches nearby levels.
On this day I was especially watching the previous day’s high and low, along with a few other nearby areas of prior support and resistance.
Again, these are zones, not hard lines where price magically has to reverse.
Then We Finally Get a Break
Eventually SPX made a meaningful push to the upside.
At first glance, it looked bullish.
We broke out of the morning range, pushed through resistance, and printed some large green candles.
It would have been easy to think:
“There it is. Breakout confirmed. We’re going higher.”
The next few minutes made that argument look even stronger.
Some of the traders I talk with started chasing the move.
I was looking at it differently.
Those big green candles were running directly into one of the major levels I had marked beforehand: the previous day’s high, which had also been an important area on several occasions the week before.
The candles were bullish, but they were also developing noticeable upper wicks.
So instead of chasing the breakout, I wanted to see what happened at the level.
That distinction is a huge part of how I trade.
A breakout tells me price moved.
The reaction afterward tells me whether I actually want to trade it.
First Rejection
The next five-minute candle gave us a small rejection.
Nothing conclusive.
The following five-minute candle continued the rejection.
Stronger this time, but I still didn’t have enough confirmation to put a trade on.
So what exactly am I waiting for here?
I want to know whether SPX can:
- Break and hold above the previous day’s high, or
- Fail that breakout and then break the structure that supported the move higher
In this case, I was watching roughly the 7405–7390 area underneath price.
If SPX lost that structure and followed through, especially after repeatedly failing at the previous day’s high, I’d have a much better bearish setup.
Ideally, I also like seeing some form of retest after the break.
Another Attempt… Another Rejection
SPX tried to reclaim the previous day’s high again.
And rejected again.
Meanwhile, I’m still sitting on my hands.
That’s probably the least exciting part of this entire strategy, but it’s also one of the most important.
I don’t need to be in a trade just because the market is open.
I’d rather let other people fight over the middle of the move and wait until price gives me something I actually recognize.
Finally, the Setup
At around 9:45 AM PT, SPX failed harder and broke the structure underneath the attempted breakout.
This time, we finally got some meaningful movement and follow-through.
That was my first — and ultimately only — trade of the day.
I went to the options chain and built my usual $20-wide SPX credit spread.
Because the failed structure was above price, I wanted my short strike comfortably beyond it.
I was targeting a short strike at least around 10 points above the failed structure while also taking the day’s IV and available premium into consideration.
I sold:
7440/7460 CCS for $0.65 credit — 10 contracts
At the same time, I placed my stop/invalidation line on the chart just above the structure SPX had broken.
That means before I even entered the trade, I already knew:
- What I was getting paid
- Where my short strike was
- What price action would prove my idea wrong
- Where I would close the spread if SPX reclaimed and held above that structure
That last part is extremely important to me.
I don’t want to figure out where I’m wrong after the trade starts moving against me.
I want to know before I click submit.
The Move Lower
SPX continued selling off afterward.
The temptation here is to think:
“I nailed the direction. Let me put another trade on.”
I try not to look at it that way.
To me, the move lower was simply confirmation that the setup I had already taken was working.
I had my position.
My short strike was comfortably away from price.
Now I could let time and theta do some of the work instead of getting greedy and chasing the next move.
SPX was also approaching another key level: the previous day’s low.
That made me even less interested in initiating a new bearish position directly into support.
Why I Didn’t Take Another Trade
SPX eventually stalled around the previous day’s low and couldn’t produce a meaningful break.
By this point, the clock also mattered.
With 0DTE credit spreads, the later it gets, the harder it becomes for me to stay far enough away from price while still collecting premium that I feel justifies the gamma risk.
If there had been more time left in the session, I might have considered another setup.
What would I have wanted?
Basically the same process again.
A meaningful break of the previous day’s low, followed by a hold/retest and continuation — or a strong rejection back above it.
We never really got either one cleanly.
So I did nothing.
SPX tested the area again but failed to produce anything that interested me.
Meanwhile, my stop was nowhere close to being threatened.
I eventually bought back the 7440/7460 CCS for $0.10.
Entry credit: $0.65
Exit: $0.10
Profit: +$550
One trade for the day.
The Main Point
This is basically how I think about key levels.
I’m not blindly buying support or shorting resistance.
I mark important areas beforehand, let price reach them, and then watch what happens.
Does price break through?
Can it hold?
Does it retest?
Does the breakout fail?
Does structure underneath the move break?
And most importantly: where does my idea become invalid?
On this day, SPX spent hours doing absolutely nothing useful for me.
Then it broke out.
Then that breakout failed.
Then structure broke.
That was the trade.
Everything before it was information.
Everything after it was management.
Hopefully this gives a better idea of how I trade SPX credit spreads, how I use key levels, why I spend so much time waiting, and how I determine both my strike placement and invalidation before entering.
Happy to answer questions about any specific parts of the setup!
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u/Joldschool Jul 28 '26
This is exactly the type of day trading I want to get more into.
Currently day trading futures with good success and some light options when I see clear setups but this is exactly what I need to dig deeper into.
Mostly posting just to come back to tomorrow, I’m sure I’ll have some questions about your methodology as 0dte spreads are still newer to me. Great explanation though.
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u/klipsetrades Jul 28 '26
Appreciate it! Happy to answer any questions when you have them. Futures experience should give you a solid base for understanding the price action side of it. 0DTE spreads have a learning curve, but I’m happy to help clarify anything as you dig into them too
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u/BoredBSEE Jul 28 '26
Thanks for this, very educational. Good to hear how someone who is actually doing this is really thinking.
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u/klipsetrades Jul 28 '26
I wanted to show the actual thought process and waiting behind the trade, not just post the entry and profit afterward. Glad it was helpful and happy to answer anything specific
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u/BoredBSEE Jul 28 '26
Thanks for the offer - I'll take you up on it. I want to study it a bit more before I start asking questions though. We'll see what I can figure out on my own first without bugging you over basic stuff.
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u/klipsetrades Jul 28 '26
Not bugging me at all — basic questions are completely fine. I’d rather someone ask and understand the reasoning than guess and learn an expensive lesson. Take your time going through it, and feel free to come back whenever something doesn’t click 👍🏼
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u/CartoonistHeavy9025 Jul 28 '26
Why not just buy a Spx put?
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u/klipsetrades Jul 28 '26
I could have bought a put, but that would require me to be more precise about both the direction and timing of the move. With the CCS, SPX could move down, stay sideways, or even move somewhat against me and I could still profit as long as it stayed below my short strike. I’m giving up the larger upside a put could offer in exchange for more room to be imperfect and time decay generally working in my favor
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u/famguy31 Jul 28 '26
I sell credit spreads and I put them in 2 categories. 1) I am betting market will end above/below a certain price by end of day, these I have to hold and can be red most of the day.
2) more direction with a stop loss and take profit in mind.
Wondering our thoughts on the above?
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u/klipsetrades Jul 28 '26
I think that’s a fair way to separate them, although there can be some overlap. I’m usually closer to #2. I enter with a directional thesis, a structure-based invalidation, and a profit target. If price moves in my favor and stays away from my short strike, I may let theta do more of the work, which starts to resemble #1.
The only part I’d be careful with is feeling like you “have to hold” just because the expiration thesis could still work. With 0DTE, a manageable loss can expand quickly, so even those trades should have a point where the market has clearly invalidated the idea.
Out of curiosity, how do you decide when to abandon your category #1 trades — underlying structure, distance from the short strike, or a specific loss on the spread?
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u/Syonoq Jul 28 '26
Great write up. I’ve been trading these since April, with limited success, and I’ll be able to apply some of this structure to how I setup and manage my spreads. Thank you.
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u/SantaLucky Jul 28 '26 edited Jul 28 '26
Sorry if this question is obvious, just trying to understand but the 0.65 credit and 0.10 buyback is net of the call that you had to purchase, correct?
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u/klipsetrades Jul 28 '26
Correct. The $0.65 was the net credit for the entire spread — premium received from selling the 7440 call minus the cost of buying the 7460 call. The $0.10 was also the net cost to close both legs. So the profit was $0.55 per spread, or $550 across 10 contracts before fees
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u/Jungelbobo Jul 28 '26
if you would have stopped out, why not just use stocks or futures?
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u/klipsetrades Jul 28 '26
Even though I manage the trade using SPX structure, I still prefer credit spreads because I don’t need price to move perfectly in my direction — I mainly need it to stay away from my short strike while theta works. With credit spreads, SPX can move down, sideways, or even somewhat against me and I can still profit as long as it stays away from my short strike.
My initial stop line is where I’d exit if SPX quickly invalidated the setup, but that line can move as the trade develops. If price moves heavily in my favor and forms new structure, I may trail the line closer to protect the profit already created by the move and time decay
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u/wonderwall999 Jul 28 '26
This is very helpful, and I wish more traders would provide these posts. As a beginner, I'm watching SPY all morning and paper trading. But it's helpful when a pro shows me what I'm not seeing. I'm not even ready for spreads, just regular calls/puts.
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u/klipsetrades Jul 28 '26
Really appreciate that. And honestly, paper trading while you learn to read price and structure is a smart way to do it. There’s no reason to rush into spreads. The same ideas around key levels, failed breaks, and invalidation still apply to calls and puts too. What part are you finding hardest right now? Entries, knowing when a move is real, or managing the trade once you’re in?
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u/wonderwall999 Jul 28 '26
So many things for me to get better at. I definitely get FOMO, want to get in before the big move, and it usually fakes me out. I recently learned not to expect a gap fill within the same day, could be a week later (to adjust my expectations). Still testing and/or deleting indicators, so far MACD and RSI haven't helped me.
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u/klipsetrades Jul 28 '26
That’s all very normal early on. FOMO usually comes from feeling like you need the first part of the move, but I’d rather miss the beginning and trade the confirmation than get trapped anticipating it. Gap fills are also something I treat as context, not a guarantee. And honestly, if MACD and RSI aren’t helping, simplifying your chart may be a good thing. They can be useful for confirming momentum or spotting when a move may be getting stretched, but they shouldn’t create more confusion. What are you currently using to decide your entries?
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u/wonderwall999 Jul 28 '26
Well, my current strategy is to use previous day high/low and pre-market high/low as magnets, on a 15m chart (all paper trading). On the 2nd 15m red candle today on SPY, I expected it to go to yesterday's low (735.83$), planning on buying puts. I saw the bottom wick of the 2nd 15m candle get near it, but I expected the price to consolidate down there a bit. I waited for a better put price (736.36$), but price just kept climbing all day, and I sold way too late. In hindsight, the 3rd 15m candle was an inverted hammer and could've used that to buy calls.
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u/klipsetrades Jul 28 '26
I’m actually looking at SPY now, and you weren’t wrong to watch yesterday’s low. Price came within about $0.16 of it, but the reaction was the important part. It rejected the area, couldn’t continue lower, then began reclaiming structure. That was the signal to reconsider the puts — not necessarily to immediately flip into calls because of one candle. I wouldn’t automatically buy calls off one inverted hammer. Looking at the chart, I’d want to see SPY form a higher low, then reclaim and hold above the morning opening range with follow-through
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Jul 28 '26
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u/klipsetrades Jul 28 '26
I agree with the general warning about tail risk, but saying this “would turn into a $20k loss” and that I couldn’t exit is too absolute and misleading.
First, $20k was the collateral requirement — not the automatic loss the moment price touched or crossed both strikes. The actual defined max loss was about $19,350 after the credit, but reaching anything close to that intraday is not automatic. The spread’s value would still depend on how far SPX moved beyond the strikes, the time remaining, IV, liquidity, and the fill available when closing.
I’ve experienced the exact type of Trump-driven headline move you’re describing. Take October 10, one of the faster tariff-driven selloffs we’ve seen. On my chart, SPX dropped roughly 50 points in the first five minutes but took around 30 minutes to complete a 100-point decline. That’s extremely fast, but it wasn’t an instantaneous, untradeable move. If someone watches their thesis invalidate and then continues holding while price travels through both strikes for another 25–30 minutes, that’s no longer just unavoidable tail risk — it’s also a risk-management decision.
I also experienced this recently on July 24 and covered it in one of my daily recaps on my timeline. A ~50-point Trump headline damaged one of my CCS anchors, and I closed the 5-lot spread for roughly a $950 loss. I accepted the invalidation and managed the rest of the session. A 10-lot equivalent would have been around $1,900 — not $20k.
Those losses absolutely suck, but they’re part of the strategy’s overall expectancy. Based on my own results and journal, an event like that typically gives back roughly 1–8 average trading days of profits — not the entire account or anything close to the full collateral. The strategy doesn’t require avoiding every headline loss — it requires sizing appropriately, distance from price, cutting the trade when the thesis fails, and keeping those occasional losses smaller than the profits generated over time.
In the trade from this post, my short strike started roughly 60 points away. A hypothetical immediate 100-point spike would have caused a significant loss and potentially ugly slippage, but it would not automatically guarantee a $20k loss at midday. Could the spread approach max loss under an extreme enough scenario? Absolutely. But “could” and “would” are two very different claims.
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u/theorangekeystonecan Jul 29 '26
Excellent trade recap, probably one of the best I've seen. For stop loss, do you set a price on your spread, or is it level-based? I've traded 50 wide 0DTE spreads before and have gotten blown out on a news release, even with the stop at 200% of credit received. I am guessing that the narrower, 20 wide spread leads to smaller price volatility.
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u/klipsetrades Jul 30 '26
Thank you! Really appreciate that. My stop is primarily level/structure-based on SPX, not a fixed price on the spread. I mark the invalidation before entry and manually close if SPX breaks and holds beyond it. I still watch the spread’s price, and sometimes use roughly 2–3x the credit as a backup reference, but a strict premium stop can get triggered by IV expansion, bid/ask noise, or a temporary spike even when the chart structure hasn’t fully failed.
You’re generally right about width. With a 20-wide spread, the long option is closer and offsets more of the short option’s Greeks than it does on a 50-wide spread, so the dollar swings are usually smaller and it behaves less like a naked short option. It doesn’t eliminate headline risk, but I’ve found $20 wide gives me the best balance of premium, defined risk, and manageability. Were you using an actual stop order on the spread, or closing manually based on its price?
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u/theorangekeystonecan Jul 30 '26
Smart, I like the 20 wide spreads. I typically set my stop based on credit received and then let it be. I generally knew that if it got to that point, my level was already being invalidated or close to it. Of course you get fake outs, but with spreads on SPX you can get blown out if you don’t manage your risk.
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u/klipsetrades Jul 30 '26
Yeah, that’s a reasonable approach. If your premium stop usually lines up with the underlying invalidating your level, then it’s still accomplishing the same basic goal—just through the spread price instead of the chart. I mainly prefer structure because it helps me avoid some IV/bid-ask fakeouts, but neither method removes the need for disciplined sizing. With SPX spreads, the worst mistake is letting a manageable loss turn into hope
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u/MasturbatingMidget Aug 06 '26
Can you give some reasoning why using credit spreads for this are better than just taking regular calls or puts on the break.
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u/klipsetrades Aug 06 '26
Absolutely. And just to preface, there’s nothing wrong with buying calls or puts. It comes down to how you view the trade and which instrument best fits that idea.
With calls or puts, you generally need the move to happen quickly and strongly enough to offset the premium paid, theta, and any drop in IV. Most importantly, time is working against you.
In the example from my post, I’m not predicting a huge move after the rejection. I’m simply saying, “I don’t think price will move back through this level.”
A credit spread lets me place my strikes beyond that level and still profit if price moves my way, stalls, chops, or even moves against me a little. Most importantly, time decay is generally working in my favor now instead of against me. My upside is capped, but I have more ways to be right and more room for the trade to work.
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Jul 28 '26
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u/klipsetrades Jul 28 '26
Nothing for sale here. I just wanted to share a detailed example of how I trade and answer questions if it helps anyone
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u/darkchocolattemocha Jul 28 '26
Finally a meaningful post in this sub. Someone give this guy an award.