Automated trading with stocks and 2 options

Quote from Maverickz:

So you are basically looking at gamma scalping in a very short time frame then?
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To be frank, I do not have an answer at this moment because I do not know what is precisely meant by "gamma scalping".

I will read explanations on the internet and I will tell you what it has in common with what I am saying here.

For now, let me remark that what is important here is the "scheme" of order sizing enforced by the robot. That is absolutely crucial.

What the robot steals from the oscillations I consider just a "plus".
[For this reason I suspect it's a different idea, because "scalping" here is a "secondary" strategy: could be even omitted].

T
 
Quote from tommaso:

To be frank, I do not have an answer at this moment because I do not know what is precisely meant by "gamma scalping".

I will read explanations on the internet and I will tell you what it has in common with what I am saying here.

For now, let me remark that what is important here is the "scheme" of order sizing enforced by the robot. That is absolutely crucial.

What the robot steals from the oscillations I consider just a "plus".
[For this reason I suspect it's a different idea, because "scalping" here is a "secondary" strategy: could be even omitted].

T
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This explains Gamma Scalping quite well.

http://masteroptions.com/wp-content/uploads/2009/07/ScalpGamma-article.pdf
 
Quote from tommaso:

On top of it ("the minimum guaranteed profit") you have the robot which will capture all the oscillations. This is "extra profit", not included in the "worst scenario minimum profit".
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As said above by someone else, the worse profit scenario is a loss, there is no garanteed profit.
 
Quote from Maverickz:

So you are basically looking at gamma scalping in a very short time frame then?
More...


Ok I checked it.

The answer is no. That's a totally different concept.

When I compute a "worst scenario P&L", to be conservative I merely confine myself to the intrinsic value of the option.

The profit arises essentially from the fact that the last orders (close to the max number of shares) are enormously bigger than the orders placed near the strike.

At the end you will have a huge number of shares, most of which have been bought very far away from the strike.

In addition, you may get the very probable chance that, due to a small reversal, the bot is able to compensate totally the losses due to the share you already bought. And this will cause that the max number of shares will be reached at a place even farther away.

(In any case we are talking about ranges that can be set to be relatively small (like a 5 dollars or so) and therefore are always hit quite soon, even if the bot does a good job by "pushing them away").


T
 
And what happens if the price never oscillates far away from the strike, thus denying you the ability to enter your position at prices that are "very far" from the strike?

This is what someone meant above, when they said you were long vol. You are long volatility.

No one is foolish enough to sell you calls/puts if there was any sort of "certainty" that the price of the underlying was going to be oscillating beyond the premium.
 
Quote from heech:

And what happens if the price never oscillates far away from the strike, thus denying you the ability to enter your position at prices that are "very far" from the strike?

This is what someone meant above, when they said you were long vol. You are long volatility.

No one is foolish enough to sell you calls/puts if there was any sort of "certainty" that the price of the underlying was going to be oscillating beyond the premium.
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Yes, that's a very good observation.

But note that we are talking here about unilateral ranges of 5 dollars or so. Take for instance TWM, and tell me what are the chances that I remain within that range before my options expiry.

And, further if the price remains inside, fine!, I will be happy because the robot will make a massacre over all the oscillations inside the range.

Sounds convincing?

T
 
Quote from tommaso:

Yes, that's a very good observation.

But note that we are talking here about unilateral ranges of 5 dollars or so. Take for instance TWM, and tell me what are the chances that I remain within that range before my options expiry.

And, further if the price remains inside, fine!, I will be happy because the robot will make a massacre over all the oscillations inside the range.

Sounds convincing?

T
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Where is this going? It was supposed that there is no trades inside the strikes.
 
Quote from total_keops:

Why bother with options when you have that magic stealing bot?
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Options are necessary, because you need limited loss on one of the two sides.

If you use shares only, you will be unlimited on both sides, and there is no way (that i know) to make it work, unless you have really enormous capitals.

[With enormous capitals it is obviously possible to ensure that a robot will never lose, not even a day. But that's not interesting because you can find better ways to use your capital than trading! :-)) ]


T
 
Quote from total_keops:

Where is this going? It was supposed that there is no trades inside the strikes.
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What?

Let me draw a scheme. Let's assume the straddle case.


--- until -10.000

Robot works here

sell here

100 CALL 35 ----------------------------
100 PUT 35 ------------------------------

Buy here

Robot works here

--- until 10.000



What do you mean "no trades inside the strikes" ?

There may not be "inside the strikes" at all.

At most, you may have a space of say 1 dollar (if you take the first 2 in-the-money options).
 
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