After 1.5 years of simulated options trading (full-time, every day, open to close) I have finally gotten to the point (in experience after making 1,000 stupid mistakes) where I can consistently make profitable option trades (daily, buy at open, sell at close).
For example, I simulate buying a call on a small-cap stock, the call has a 1 month expiration and a delta of .5 at open (or 09:33). Later that day, I sell that option at close (or 15:47) at a delta of 1 (from .5 earlier) after the stock price increases AT LEAST 6%. I enter a new call on a new stock ALMOST every day. Consistently, I can SIMULATE this buy option at open and sell option at close profitability.
However, this is ONLY true if I buy at the option ask price (@9:33, fair enough) and then SELL (@15:47) at the option MARK price, NOT the option bid price.
Why? Because what happens is that as the stock price increases more than 6% (consistently, every day) then the option bid price becomes SLOW and SLUGGISH to increase at the same rate as the option ask price which increases in lock-step with 6% increasing stock price; consequently, the option price SPREAD EXPANDS (whereas the option price spread was narrow when I bought at open now its expanded at the close).
My question is: What's the probability of immediately being filled at the option MARK price IF at that mark price I have a consistent 13-21% profit whereas if I get filled at the option bid price then I have only a 5-8% profit (a huge profit difference).
I ask this question because I THINK I see calls being consistently sold back at the mark price (not the bid price) at close (but I'm not 100% sure because I only ever traded in simulation so far).
So, it seems to me that the probability of being filled at the mark price is 100% for at least a 13% profit if you have at least an 5% profit at the bid price too, right?
For example, I simulate buying a call on a small-cap stock, the call has a 1 month expiration and a delta of .5 at open (or 09:33). Later that day, I sell that option at close (or 15:47) at a delta of 1 (from .5 earlier) after the stock price increases AT LEAST 6%. I enter a new call on a new stock ALMOST every day. Consistently, I can SIMULATE this buy option at open and sell option at close profitability.
However, this is ONLY true if I buy at the option ask price (@9:33, fair enough) and then SELL (@15:47) at the option MARK price, NOT the option bid price.
Why? Because what happens is that as the stock price increases more than 6% (consistently, every day) then the option bid price becomes SLOW and SLUGGISH to increase at the same rate as the option ask price which increases in lock-step with 6% increasing stock price; consequently, the option price SPREAD EXPANDS (whereas the option price spread was narrow when I bought at open now its expanded at the close).
My question is: What's the probability of immediately being filled at the option MARK price IF at that mark price I have a consistent 13-21% profit whereas if I get filled at the option bid price then I have only a 5-8% profit (a huge profit difference).
I ask this question because I THINK I see calls being consistently sold back at the mark price (not the bid price) at close (but I'm not 100% sure because I only ever traded in simulation so far).
So, it seems to me that the probability of being filled at the mark price is 100% for at least a 13% profit if you have at least an 5% profit at the bid price too, right?
