What would you do if..

..you could at the same time be short and long the exact same contract (same type, strike and tenor)? With the caveat that at the end of the day all double positions are automatically closed.

Just asking for a friend..

 

I do not know what I would do in the options world, but in the CME futures world I would be very afraid, because that is a wash trade and is very illegal.

Answering for your friend.

 

haha there is no illegal stuff involved.. the market rules here are very different from the US. I just discovered there is this possibility, wondering if it can be exploited in any way that is meaningful for a retail trader, I'm not planning to manipulate the markets..

 

I would leg in and let the positions expire since profit is locked in.

 

Your friends vision can be accomplished, but they
should use two different accounts for each
direction. Your friend should get acquainted
with the strategy of running spreads using
software for the calculations.

 

Ahhh is this a trick question cause if you are long and short the same contract you have no position as they cancel each other out.

 

yes of course if entered at the same time they cancel each other. I figured I could first wait to see if the long makes money, then close the long and wait for the short to mean revert..

 

As soon as you put your short on you are exiting the long.

 

Baozi, it does work. You just need at least two accounts.
There's a book on this strategy but I can't remember
the authors name.

 

well it was just an idea, just wanted to hear if anyone had a more creative idea..