1) Finding The SPX 0DTE Butterfly Setup

First, we’ll show you how to use our VolM (Volume Momentum) tool to identify when markets are likely to remain range-bound. This tool helps us understand:

• Where price is likely to settle
• When choppy conditions are most probable
• How to confirm our range-bound thesis

This is a key first step to profitably trading SPX 0DTE Butterfly strategies.

2) Capitalizing on Opportunity

Next, we’ll explore how to profit from these conditions using a butterfly spread – an options strategy specifically designed to thrive when stocks trade within a defined range. Think of it like placing guardrails around where you expect the stock to trade.

When price stays within those rails, you profit and the beauty of combining these two approaches is that our VolM analysis helps inform exactly where to place those guardrails.

By the end of this article, you’ll understand how to spot these setups and position yourself to profit from them.

Let’s start by understanding how a SPX 0DTE butterfly spread works, then we’ll look at how VolM helps us find the perfect conditions to use it.

Understanding the SPX 0DTE Butterfly Strategy

A butterfly spread is a powerful strategy that can help you profit when you expect a stock to stay within a specific range. But rather than just telling you it’s powerful, let’s break down exactly how it works and why it’s particularly effective in choppy markets.

How A Butterfly Works

Think of a butterfly spread as placing guardrails around where you expect a stock to trade. The setup involves three simple parts:

• Buy one call option at a lower strike price
• Sell two call options at your target middle strike
• Buy one call option at a higher strike price

Your maximum profit occurs when the stock finishes right at your middle strike price – where you sold the two options – and your risk is limited to what you paid (i.e., premium) to enter the trade.

For example, if you think SPX will settle around 4515, you might:

• Buy 1 call at 4505
• Sell 2 calls at 4515
• Buy 1 call at 4525

Why the SPX 0DTE Butterfly strategy makes sense

The beauty of a butterfly is that it tells you exactly what you want to see happen. You’re not hoping for a big move up or down – you simply want the stock to settle near your middle strike.

This is where our VolM analysis becomes crucial.

By using VolM to identify when SPX is moving sideways with clear boundaries, we can place our SPX 0DTE butterfly right in the middle of where the market is most likely to settle – rather than guessing, we’re using market-generated data to inform our target price.

Remember, in choppy markets, stocks tend to stay within defined ranges. Combining this natural market behavior with a strategy designed to profit from it creates a potent edge.

Using VolM to Find High-Probability Setups

Our VolM tool helps take the guesswork out of identifying range-bound conditions. Rather than hoping a stock will settle near your target price, VolM shows us where the market is actually focusing its activity.

What VolM Tells Us

VolM tracks the center of mass – speculation – for both call and put option activity throughout the trading day. It plots this activity on 5-minute intervals (solid lines in the figure below), creating lines of best fit (dashed lines below) that show us where options traders are focusing their attention.

When these lines start trending sideways and the rate of change (of the dashed lines) approaches zero, we have our first clue that the market is settling into a range. This is exactly what we want to see before placing a butterfly spread.

Measuring Market Stability With CenTab

In addition to the VolM command, we also leverage our CenTab command, which provides critical measurements of the VolM lines of best fit. This gives us even more precision in identifying ideal butterfly setups:

• Rate of Change Analysis: The top section of the CenTab visual plots the rates of change for the call and put lines of best fit. For a butterfly trade, we look for these to be pinned at or near 0, which tells us the projected path is stable, not shifting.
• Slope Measurement: The bottom section measures the actual slope of the lines of best fit (rarely are the slopes ever at 0). In the example below, we see the put slope above zero (trending higher) and the call slope below zero (trending lower) – this is normal for choppy price action.

The key insight is that while the lines may have positive or negative slopes, those slopes aren’t changing much (hence the rate of change near 0). This stability indicates a high-probability range-bound market – perfect for our butterfly strategy.

The Perfect Setup

Let’s break down what we look for:

1. Flat or Stable Trend Lines (CenTab): When both call and put lines maintain consistent slopes, it indicates a predictable market environment.
2. Rate of Change Near Zero (CenTab): This confirms market sentiment is stable – traders aren’t suddenly changing their speculation.
3. Clear Boundaries (VolM): The space between our call and put lines gives us our likely trading range, helping us identify the optimal middle strike for our butterfly.

The sweet spot for entering these trades typically comes in the afternoon session, after the London close. By this time, the market has usually established its daily range, and VolM/CenTab can give us a clearer picture of where spot price is likely to settle.

Now that you understand how a butterfly spread works and how VolM (and CenTab) helps us find the right conditions, let’s look at a real example that brought these concepts together…

NOTE: If you would like to further understand and unlock the power of our volume analysis methodology for SPX, be sure to check out this prior article, which is a deep dive into that exact topic.

Seeing The SPX 0DTE Butterfly Strategy Come Together: A Real Trade Example

Let’s walk through an actual trade setup from March 18th, 2025, showing you exactly what the conditions looked like when we spotted the opportunity and how it played out.

The Setup At 1:00PM ET

By early afternoon, our VolM and CenTab analysis showed a classic range-bound structure perfect for the makings of a butterfly trade:

• Both call and put centroids were trending in opposite directions (call centroid moving lower, put centroid moving higher), creating the choppy price action typical of range-bound markets
• The slopes of both centroids remained consistent throughout the late morning into early afternoon
• Most importantly, the rate of change for both lines of best fit had been hovering near zero since 12pm EST through 1pm EST (as shown in the CenTab visual above)

This combination of factors strongly suggested the market was settling into a defined range. Looking at our lines of best fit at 1PM EST, we could identify clear boundaries:

• Upper boundary around 6113
• Lower boundary near 6104
• Midpoint target approximately 6108

With these parameters established and rates of change near zero, we had our ideal setup for a butterfly spread targeting the 6105 strike. The projected settlement window (shown in the VolM chart) indicated this area was the most likely destination for price by the end of the session (as of 1pm EST).

What made this setup particularly compelling was the stability in both charts – the consistent slopes combined with near-zero rates of change had persisted for over an hour, giving us high confidence in the projected range.

Fast Forward to 2:00PM ET

Moving forward an hour, our tools continued to validate our range-bound thesis:

• Price action remained choppy as expected, oscillating within our projected boundaries
• The call centroid line of best fit had shifted slightly higher (now projecting to 6119) while the put centroid remained relatively consistent
• Most importantly, the rates of change continued to be pinned near zero, confirming the stability of the market structure

Looking at the updated VolM chart, we can see the projected settlement window now centered around 6110-6115, slightly higher than our initial assessment but still well within range for a properly structured butterfly spread.

The CenTab chart reinforces this stability – notice how the top portion shows both call and put rates of change remaining flat near the zero line for over two hours. This persistence of near-zero rates of change is exactly what we want to see for a high-probability butterfly setup.

While this slight shift might have required minor adjustments to your trade, a butterfly centered at 6110 would still be well-positioned to capture the likely settlement range. This demonstrates why proper position sizing and risk management are crucial – markets rarely follow our projections with perfect precision, but a well-structured trade accounts for these minor variations.

NOTE: In the accompanying video below, we explore a key strategy refinement – using wider butterflies (15 or 20 points wide instead of traditional 5-10 point spreads). At 2pm EST, the projected range between our lines of best fit typically spans 30-40 points. Rather than trying to pinpoint the exact settlement price, a wider butterfly allows you to cover more of this range, significantly improving your probability of success. This approach means you might open multiple butterfly positions across the projected settlement zone, creating a “constellation” effect that captures price movement as it approaches finality. While wider butterflies require more capital, they provide much better coverage against the natural imprecision in market projections.

How It Played Out

Looking at the final VolM and CenTab charts at market close, we can see why this setup was so powerful:

• SPX settled at 6115, directly within our projected settlement range
• The rate of change remained near zero throughout the entire afternoon session
• Both call and put centroids maintained their structure, with minimal slope changes

What’s remarkable is the consistency we observed throughout the day. From our initial analysis at 1:00 PM through the closing bell, the market structure remained stable – exactly what our butterfly strategy requires.

Notice how the spot price line on the VolM chart fluctuated throughout the day, yet ultimately settled at 6115, almost perfectly between our projected boundaries. This wasn’t just luck – it was market structure at work. The volume patterns showed us where options traders focused their activity, creating a natural gravitational pull toward this price level.

Key Lessons From This SPX 0DTE Butterfly Example

1. Patience pays off: Waiting until early afternoon allowed the day’s structure to fully develop and stabilize
2. Confirmation matters: We needed both the right structure AND near-zero rates of change persisting for hours
3. Risk management is crucial:- Using wider butterflies or multiple positions would have increased our probability of success
4. Trust the data: Even as price fluctuated, the underlying structure remained stable, pointing to the eventual settlement area

This example demonstrates why combining VolM and CenTab analysis with butterfly spreads creates such a powerful edge. We’re not just guessing where the market might go – we’re using actual market-generated data to identify high-probability outcomes.

Key Implementation Guidelines

To make the most of this strategy, remember:

1. Timing Matters
   
   → Wait for afternoon sessions (after 11 am EST) when market structure is more defined
   → Look for rates of change near zero persisting (for the lines of best fit)
   → Don’t force trades early in the day when structure is still developing
   
   
2. Risk Management is Critical
   
   → Close positions before market close – never hold overnight
   → Size positions appropriately – butterfly spreads should be part of a broader strategy
   → Take profits when available rather than trying to maximize gains
   
   
3. Use Your Tools
   → Let VolM guide your strike selection
   → Confirm structure before entering
   → Monitor for any shifts in rate of change that could signal changing conditions

Want To Go Deeper?

While this article gives you the foundation, we’ve created a comprehensive video that dives deeper into:

• How to spot these ideal VolM and CenTab patterns
• Setting up the butterfly spread (hitting on both width and number of positions)  to match what VolM is telling us
• Managing the trade as the day progresses
• Advanced techniques to potentially enhance the strategy