After 1.5 years of simulated options trading (full-time, every day, open to close) I have finally gotten to the point (in experience after making 1,000 stupid mistakes) where I can consistently make profitable option trades (daily, buy at open, sell at close). For example, I simulate buying a call on a small-cap stock, the call has a 1 month expiration and a delta of .5 at open (or 09:33). Later that day, I sell that option at close (or 15:47) at a delta of 1 (from .5 earlier) after the stock price increases AT LEAST 6%. I enter a new call on a new stock ALMOST every day. Consistently, I can SIMULATE this buy option at open and sell option at close profitability. However, this is ONLY true if I buy at the option ask price (@9:33, fair enough) and then SELL (@15:47) at the option MARK price, NOT the option bid price. Why? Because what happens is that as the stock price increases more than 6% (consistently, every day) then the option bid price becomes SLOW and SLUGGISH to increase at the same rate as the option ask price which increases in lock-step with 6% increasing stock price; consequently, the option price SPREAD EXPANDS (whereas the option price spread was narrow when I bought at open now its expanded at the close). My question is: What's the probability of immediately being filled at the option MARK price IF at that mark price I have a consistent 13-21% profit whereas if I get filled at the option bid price then I have only a 5-8% profit (a huge profit difference). I ask this question because I THINK I see calls being consistently sold back at the mark price (not the bid price) at close (but I'm not 100% sure because I only ever traded in simulation so far). So, it seems to me that the probability of being filled at the mark price is 100% for at least a 13% profit if you have at least an 5% profit at the bid price too, right?
The mark is determined by the last trade. If you hit the bid to sell your options then that will be the new mark. Assume you will cross bid offer on your strategy - if your strategy requires you to trade at mark it will probably fail in real life.
Sounds like you are scalping options. The spread is left to the whims of the market maker. You may be hitting the midpoint or the model price, but you still forgo the difference between the best bid and your fill. Think of value the spread as a percentage of the move you are trading. Have you ever seen a product piss away so much for so little? Options are probably the worst place to day trade. If you insist on this path, I recommend you stick to the most liquid names with penny to dime spreads. Even then, have you ever seen the chart of intraday IV? There's a black swan everyday. There is a right product for the right strategy. If you can consistently predict stock movement intraday then you trade the underlying. There are other ways to get leverage. In 1.5 years of simulation, did you pick up an options book?
People can give you a bunch of long winded reasons why what you're talking about doesn't work in practice, but as simply as can be stated, it's best if you just accept the following as a truth and move on to more fruitful system building. There is no bid / ask / carry arbitrage available to retail traders. It's a dead end my friend.