Not being a dick - if you sell expensive and buy cheap and don't neutralize the trade you will make money frequently and die from any event. Go look at my chapter on volatility in "Master Traders". If you neutralize the trade and even trade around it it's hard to do it profitably without size. I would also read Black Scholes to Black Holes or Natenberg.
Like if someone fat fingers extra 0's in their order and the option ends up trading way above ask price, even above ask price of the next strike. Not that it happens often.
"Like if someone fat fingers extra 0's in their order and the option ends up trading way above ask price, even above ask price of the next strike. Not that it happens often." That's why they have an obvious error rule.
I will take a crack at it, thank you. I only trade defined risk for that very reason. Market drops 20% my max loss should be no more than 17% (all puts itm) when trading delta neutral, since downmove>IV Increase effect on the Call Side.
Not sure where you are going with this... Other than 2 way flow(and OPM),the distinction between "big firm" vs "retail"is meaningless... Its a question of being gifted or challenged/good or bad.. Forget about your proprietary model. There are stocks out there which will have mispriced options relative to other strikes.Its typically not for size,but if you are somewhat adept/nimble and can split the market on another strike to hedge,you can pick up nickles and dimes all day long. bang out the rich bid/take the cheap offer,hopefully split a market to hedge and more often than not you can put a spread order in to flip the position and "make your edge". If you cant immediately get out,then you become the market maker and trade around it... Forget about the big firm arbitrage advantage on listed options.That exists in your head..The playing field is level..
Yes indeed... Ill let you guys in on a secret.. In a stock like TSLA,should one be so inclined,you can GRIND out 500 bucks per day picking off relatively mispriced options..I hear the algo story,but I beat them to the punch all the time.In fact,they are my friends... Im not bullshitting anyone,and the only reason I mention a specific stock is due to the fact that trading TSLA to pick up nickels and dimes is freaking exhausting and a distraction to the bigger picture..
I was actually starting to come around to that conclusion - playing around with gamma-scalping in TSLA, and wondering why my model was coming up with weird pricing vs. my platform. Spent a bunch of time thinking it was me screwing something up... I hadn't reached the point of "hey, maybe I could make money with this!" yet, but I'll keep my eyes open to it now. Thanks, @taowave !