Scalping Equity Options!

Discussion in 'Options' started by bvam1, Apr 11, 2002.

  1. bvam1


    Many people out there are scalping stocks, but I wonder why nobody even considers scalping options? Are there anyone who's doing this right now? If so, let's discuss strategies to compete with the MMs! I have one or two, and will be glad to share my insight!
  2. I am trading options short term but not scalping. The bid ask spreads on options would severely limit any scalping attempt.
  3. bvam1


    Hm, I am glad people are thinking scalping options is not possible! Less competition to deal with!
  4. tntneo

    tntneo Moderator

    Go ahead then :)
  5. dknj23


    hi as a former options market maker trader trainee on PHLX, i can say it is extremely hard to scalp especially when you do not have a position to trade on. MM and Specialist on the floor rarely scalp even considering the great advantage they have being on the floor because it just isn't proftable enough and plus the fact that the position can quickly get away from you. this is assuming that you mean day trade. anyway you also have to consider what will happen if you don't cover and have till wait a week or so, at that case not only has the option have to becoe close to where you initially traded it but also have to consider the decay factor=theta.
    if you been successful, good for you. i guess keep it up. but in options the big money like equity is made by taking some kind of position.
  6. tntneo

    tntneo Moderator

    also, as I understand it, it's not allowed.
  7. tntneo,

    Just to clarify your point about what is possibly not allowed in options.Some rules imposed by exchanges prohibit customers from simultaneously posting a bid and an offer on the same option to try to mimick a floor market maker. Some firms also will charge for fees for excessive cancelled orders and other little rules intended to make surrogate off floor market making harder. But you can certainly scalp options wherein you buy a put in the AM and sell it 10 minutes later to take loss or hopefully profit from stock movement.

    Just my 2 cents
  8. Babak


    Would love to hear how you would get around exchange imposed restrictions that prevent exactly what you propose. Enlighten us.
  9. trdrmac


    I tried something similar for about a month, and it is one of those things that for me seemed better on paper than in practice.

    Although don't let my negativity or lack of skill discourage anyone.

    Other than the rule prohibiting being on the bid and ask at the same time, which is reason enough there are other issues.

    I have some Qs in my account that I sell calls against, one of the most liquid options contracts out there.

    If I sell and prices go up, why cover, I want rid of the things anyhow, not to mention time works in my favor.

    If I buy back and prices drop, why not just resell, time decay works in my favor.

    There are a bazillioon contracts sitting on the bid and ask so you are really at the MERCY of the market maker. Not to be critical, but it would seem that sometimes you only get the fills you don't want. And they just don't come that often, even when my contracts hit a nickel, I have had bids sit for a day or more.

    I have tried to augment this strategy by buying the contracts back when they decay, looking for a rally to resell them. But I would say especially over the past year this is at best a wash and I have found that some months I have bought them for a dime only to sell them back for a nickel.

    Finally, volatility sucks, I figure at best I will write 1/2 of the premium I wrote last year, so there is really less option to trade.

    Just what I found, others may have better luck.
  10. bvam1


    You guys really don't believe that scalping options is possible? Here, check out this link:

    He's doing! As for me, I will do it, or try to do it soon. I believe there's a weakness in the system and I'll might as well try to profit from it. Nevertheless, I have not try yet, so I am not in any position to claim anything. My posting is intended to find if anyone out there is scalping.

    Furthermore, when I say that the system has a weakness, I will not be foolish enough to point out that particular weakness or how I am going to do it. My insight is that the people might be able to scalp options.

    I am well aware of the rules of the exchanges. In fact, they are trying their best to prevent scalping. But the option market is so imperfect that it has, I believe, a weakness. I'll try it during the summer and back up my claim with concrete results, hopefully, in due time. Until then, I guess you guys can say anything you want.
    #10     Apr 12, 2002