I trade in a JBO. With a haircut I try to make 5% to 10% a month. I have actually had 30% to 40% months but this is not with Reg T margin treatment. You really can't do that in retail.
Thanks for that timbo . He appears to be talking about ctm backspreads but then he also makes a general statement: "Anytime you are short options you should always scalp them" Can you see the source of my question now ? However, I think I have the answer, but it's alsways nice to see it confirmed. daddy's boy
By scalping, i'm not referring to active day to day scalping. But rather buying back your short options when there is no jiuce left. That is a no brainer. You should never leave .05 and .10 options on your sheets. Buy them back and sell if you can re-sell them for 1.00 to 2.00.
What is a CTM backspread??? And for you "beginning option traders",legging into a backspread is no small feat.You need to be an adept directional trader or on the right side of volatility.... Personall,I dont see how anyone could have made money being long backspreads in the equity markets without making directional bets
CTM= close to the money No, I'm not talking about legging in from the start. I'm talking about trading the short call back and forth until you have a net credit that exceeds the difference between the strikes. I do it all the time. No, it's not that hard. But it requires you to do more then just sit on a spread and wait for expiration.
Mav,thats really not much different than trading your gamma and hedging your delta,unless i am missing something.You just choose to trade the short option.. I have a feeling you are either very good at assessing an individual stocks vol rel to the implied,or you are a very good directional trader...
Buying back your short options is not gamma scalping. You usually have a flat delta position when you are buying back your short calls. The reason you are buying them back is because they are worthless, not because you are trading your deltas. Yes, you can trade backspreads from a directional standpoint or you can trade them delta neutral. Like I said, they are very versatile.
Hard deltas are real, soft deltas are not. Hard deltas are ATM or ITM options. Soft deltas are always OTM and have nothing but time premium. When you are trading hard deltas, it is said that you have a real position. You are trading the underlying. If it moves against you, you need it to move back. This is not true with soft deltas. Some guys like to trade hard deltas. Some guys prefer to always trade softs. Some do both but try their best to roll their positions anytime their short options get ATM.