Call spread

C

clarodina

Heard about some traders scalp on call spread moving up and down

Say bought a spy call otm and sell a call up a strike

If spy is up a dollar sell the bought call and buy the same strike to maintain the spread vice down

However despite having profit with spy up a dollar at expiration the total debit remain same due to bought the strike at higher price

Anyone comment on how to scalp a call spread
 
I'm no options expert, but scalping spreads will have very high transaction costs. Make sure you keep that in mind as you proceed.
 
IAS_LLC said:
I'm no options expert, but scalping spreads will have very high transaction costs. Make sure you keep that in mind as you proceed.
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Correct. It is best to choose higher priced stocks, that move around and have customer volume.That way you don't have to trade to make pennies.
 
You can take out directional risk by hedging with stock or creating a ratio. By doing this it will make it harder to make money in the short run. Most scalpers with options make money from stock movement or option exchange rebates. It possible to play movement in changing of implied vol too, but that is more difficult with a manual trading system.
 
If a trader take profit closing the brought call with spy up the sold call would have direction risk

If price did not retrace the sold call would incur loss
 
clarodina said:
If a trader take profit closing the brought call with spy up the sold call would have direction risk

If price did not retrace the sold call would incur loss
More...


I recommend you read "Options Volatility and Pricing". It covers complex derivative relationships as well as covers some hedging strategies to get your spreads delta neutral ("remove" directional risk). In my opinion, its a must read if you're going to trade derivatives.
 
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