If he's not doing this to get around capital or margin requirements, then, to use the proper trading term, oh i got it, its flat out retarded.
Thought the same thing but hey if it works for him then I won't knock him. I don't know about the margining but Im guessing it works to his favor.
The longer term expectation from scalping stocks is negative, anyone with some experience knows that and whoever argues the opposite is a dreamer and not a trader. Profits from stocks depend on finding growth and value stocks and following trends or executing suitable swing trades.
He was a lon term investor for 20 years which didn't serve him well, hes only been doing it for 3 years, so am sure his luck will run out soon I don't know much about scalping but he seems to be good at what he does, so maybe there are traders out there that are capable.
its the same as putting on a box and lifting legs ,but in the box ,the options need to be liquid,if he's doing it in spy,he could leave the short calls and puts on for protection and get in and out of the stock all day with a 1 cent spread
Not quite. The margin on a naked option is appriximately 20%. The margin on stock is 50%. That's 2-1/2 times higher. Don't agree? Try the CBOE margin calculator: http://www.cboe.com/tradtool/mCalc/default.aspx
The only way these scalps can make money on the equity side is if the stock reverses and he recoups the paper loss. If it doesn't, the now directional equity side starts net losing. If you understand options, the delta of the short option losing value is dropping so he's getting a small gain. Conversely, the delta of the open short option is rising so it's gaining value faster (that increase in option value is a loss to him since he's naked) than the other one is losing. If there's a large move, bringing the a short strike into play, he'll be picking up peanuts in front of a steamroller. If you want a semi-incoherent system, set up a collar and scalp the underlying intraday, restoring the collar overnight. When you can do that, don't bother with the collar and just trade intraday. The short answer? If he's adept enough to take his scalp on one side just before the underlying reverses, he should just trade the underlying.
Maybe because you posted on the 25th December? With pattern recognition skills like that, I predict a fine future for you as an industrial foam salesman.