RETAIL TRADERS - Success Scalping a Short Straddle?

[RedEyeFly]

I've been talking to quite a few of you regarding scalping gamma. It would seem to me that if you were a market maker you would simply sell straddles and scalp gamma as it slowly decays. This is not possible for most retail accounts because of the margin requirements.

Does anyone in here have any experience doing this as a retail guy? I have a risk margin (portfolio margin) account, so I'm especially hoping to hear from someone with the same.

 

[acen1975]

Quote from RedEyeFly:

I've been talking to quite a few of you regarding scalping gamma. It would seem to me that if you were a market maker you would simply sell straddles and scalp gamma as it slowly decays. This is not possible for most retail accounts because of the margin requirements.

Does anyone in here have any experience doing this as a retail guy? I have a risk margin (portfolio margin) account, so I'm especially hoping to hear from someone with the same.

you dont need to be market maker....you' ve got to be david copperfield to scalp negative gamma.....as it SLOWLY DECAYS.......

 

[sonoma]

Quote from RedEyeFly:

I've been talking to quite a few of you regarding scalping gamma. It would seem to me that if you were a market maker you would simply sell straddles and scalp gamma as it slowly decays. This is not possible for most retail accounts because of the margin requirements.

Does anyone in here have any experience doing this as a retail guy? I have a risk margin (portfolio margin) account, so I'm especially hoping to hear from someone with the same.

I routinely do this, but not without long wingstrikes as protection. Scalping negative gamma is essentially flattening deltas at some trigger of your choosing, all the while hoping that realized vol does not exceed the implied vol you shorted.

 

[acen1975]

Quote from sonoma:

I routinely do this, but not without long wingstrikes as protection. Scalping negative gamma is essentially flattening deltas at some trigger of your choosing, all the while hoping that realized vol does not exceed the implied vol you shorted.

well done......we didnt have to wait long for david copperfield to show up.

delta neutral position of short straddle+wings is nothing else but iron butterfly,but whatever......

what i am really interested is how david copperfield is doing magic of flattening his deltas,when this will increase his negative gamma......and do nothing,but give more direction exposure to the position....
or if he tries to hedge the gamma,then he make negative scalp-nothing but defending the fly,the opposite of making money on scalp-he will lose on it.

 

[MTE]

Quote from acen1975:

well done......we didnt have to wait long for david copperfield to show up.

delta neutral position of short straddle+wings is nothing else but iron butterfly,but whatever......

what i am really interested is how david copperfield is doing magic of flattening his deltas,when this will increase his negative gamma......and do nothing,but give more direction exposure to the position....
or if he tries to hedge the gamma,then he make negative scalp-nothing but defending the fly,the opposite of making money on scalp-he will lose on it.

You use the underlying to flatten the deltas.

 

[sonoma]

Quote from acen1975:

well done......we didnt have to wait long for david copperfield to show up.

delta neutral position of short straddle+wings is nothing else but iron butterfly,but whatever......

what i am really interested is how david copperfield is doing magic of flattening his deltas,when this will increase his negative gamma......and do nothing,but give more direction exposure to the position....
or if he tries to hedge the gamma,then he make negative scalp-nothing but defending the fly,the opposite of making money on scalp-he will lose on it.

As MTE points out, use the underlying to flatten. As time goes by, you can reduce your short gamma with the appropriate long verticals. No need to continually add risk with additional short gamma to flatten. And, of course, you will lose money as you do this. That's the trade-off, and the point of my comment about hoping that realized vol ends up less than the initial vol you shorted.

 

[TraderZones]

Quote from RedEyeFly:

I've been talking to quite a few of you regarding scalping gamma. It would seem to me that if you were a market maker you would simply sell straddles and scalp gamma as it slowly decays. This is not possible for most retail accounts because of the margin requirements.

Does anyone in here have any experience doing this as a retail guy? I have a risk margin (portfolio margin) account, so I'm especially hoping to hear from someone with the same.

retail accounts have high costs when scalping and options are inherently complex. You can't simply copy the methods of those with large budgets, low costs and inhouse expertise.

None of this stuff is the kind of "edge" that a retail trader needs. without one, you are cooked.

 

[spindr0]

Quote from sonoma:

As MTE points out, use the underlying to flatten.

It seems that we have a new applicant for David Copperfield's position as Assistant In Training. Good luck acen1975!

 

[acen1975]

Quote from sonoma:

As MTE points out, use the underlying to flatten. As time goes by, you can reduce your short gamma with the appropriate long verticals. No need to continually add risk with additional short gamma to flatten. And, of course, you will lose money as you do this. That's the trade-off, and the point of my comment about hoping that realized vol ends up less than the initial vol you shorted.

this is called hedging,not gamma scalping!
you dont scalp,you hedge!
its like to say,that you have 100 shares and you buy a put to scalp gamma......you dont scalp-you hedge.

you can scalp reverse iron butterfly,not iron butterfly......in that case you lower you theta exposure,for the prize of lower gamma.....but still you have positive gamma.....

 

[acen1975]

Quote from TraderZones:

retail accounts have high costs when scalping and options are inherently complex. You can't simply copy the methods of those with large budgets, low costs and inhouse expertise.

None of this stuff is the kind of "edge" that a retail trader needs. without one, you are cooked.

i have a always a gamma scalp position.....for the last 6 months i made money all the time......well,not a lot,but its good,compared to the risk you take......
just the basic model ,which is well known doesnt always work....:

1.you open the straddle 3 months to exp.,and as closing to 1 month to exp,you look to roll the straddle again in back months.to do that look for better opportunity-when IV is considerably lower.....

2.dont scalp only with the underline,but with shorting options.....how:
when the IV is lower,than when you open the stradlle,use the underline,when the IV is higher,scalp with options.
thats how you take advantage of the change of IV,and on top of that ,offset part of the decay.

3.open OTM calendar spreads,1%to5%out of the point,when you might get stuck from a big move to one side,which might use all of our scalps-in that case,OTM calendars will be near ATM-would make you from delta ,and if underline continued to stay there,their positive theta will counterbalanse the negative theta,if the underline doesnt move back......

if you just open straddle and use the underline to scalp-really hard to make money.......i agree