What would you do if..

Baozi said:
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..
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Tell us how you do and don't spend it all in one place.
 
Baozi said:
..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..
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You are not allowed to do that in options, not from the same account. It's considered making a market, being a dealer and it's not allowed. From different accounts, some brokers might allow you to do it.
 
I'm not in the US and not trading US options that's why I can do it, its not illegal here, or at least I have the option on my broker interface and at the end of the day conflicting positions simply cancel each other. No one ever knocked at my door because of that.

My question was more of the type "what if" to elicit better ideas on how to exploit this "bug" in the system.

Please refrain from posting other "you cannot do it" replies, I know that you can't.. just imagine what would you do if you COULD do it :)
 
As other traders already said, there is no advantage in it as it's exactly the same as closing the position, by locking it in.
Minus spread, minus commissions, minus slippage, plus (eventually) the profit of legging it in.
I think it's pointless and expensive.
And you have assignment risk on many instruments if you are using a regular broker, which your friend probably is
not.
 
Baozi said:
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..
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If you did this, you'd be opening yourself to "cutting your winners short and letting your losers run".
 
Nonsense. You don't understand the basics really. It's irrelevant when the positions where entered into. If at any time one had a long and short position at the same time in the same instrument then at that time one had no exposure. It's really that simple. There really is not one advantage of doing that. It's a pure exploit to mimic trading activity when there really is not and hence it was made illegal in the US.

But then this game has been employed by bucket shops to lure in dumb customers. People still ask this stupid question.

Baozi said:
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..
More...
 
My question was more of the type "what if" to elicit better ideas on how to exploit this "bug" in the system.
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Shorting-against-the-Box is illegal.

It has been illegal for something like a hundred years or or so?

Your broker will most likely specifically refuse this, as it would also put them into hot water.

Your talking about exploiting bugs is making me wonder if it's another one of those massive holes in HOOD that is being discussed?

More details needed please...
 
Baozi said:
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..
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And how do you manage the risk when you close your long position?
What if there is no reversal and your short position becomes an even bigger loser?
 
I have traded both long and short futures in the same account but of course different entry levels. With options you could do this with timing -you'll get lucky 1 out of 3 times
 
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