What is the example's unchanged-quote round-trip loss including 1.30 fees?
Reveal the worked answer
6.30 per contract.
Five dollars of spread plus 1.30 fees.
Core Options · OPT-11 · Core
Scalping: the execution hurdle
What must a very small target overcome?
What you will learn and prerequisites
- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.
Read first: Read a contract and its premium, Rights, obligations and expiration, Defined payoff risk is not margin, Read the whole multi-leg ticket
Scalping targets short-duration moves, so the spread and fees form a large part of the required edge. A visually frequent signal can be economically negative after realistic execution.
Fast decision-making is not a substitute for understanding contract exposure and account risk.
Understand the mechanism
Buying at an ask and selling at a bid pays the spread even when fair value is unchanged. Repeated trades compound that cost. An unfilled limit order also cannot be treated as a successful hypothetical trade.
Near-expiry Gamma can change exposure quickly. The percentage change of a cheap option can look impressive while executable cash gains remain small.
Walk through the process
Estimate entry and exit prices on the correct sides. Record slippage, rejected or partial fills and time spent exposed. Judge results net of all costs and against a reproducible process.
Predetermine loss and stop-trading conditions rather than increasing size after a sequence of small losses.
Contract and decision boundary
Terminal examples use simultaneous intrinsic realization of all stated legs, before unspecified costs. Actual American exercise, assignment, early liquidation and broker handling can create different interim cash needs. These fictional comparisons are education, not orders or personalized investment advice.
A worked example
A fictional contract quotes 1.00 bid and 1.05 ask. Buying at 1.05 and selling immediately at unchanged 1.00 loses five dollars per 100-unit contract. If each side also costs 0.65, the round trip loses 6.30.
Ten unchanged-quote round trips lose 63 before other costs. The graph compounds that mechanical hurdle; it is not a predicted strategy return.
Scalping: the execution hurdle—worked comparison
Vertical: Cumulative example loss (USD)
Horizontal: Unchanged-quote round trips
1. Fictional example
Read the graph as a data table
| Unchanged-quote round trips | Fictional example |
|---|---|
| 1 | -6.3 |
| 2 | -12.6 |
| 3 | -18.9 |
| 4 | -25.2 |
| 5 | -31.5 |
| 6 | -37.8 |
| 7 | -44.1 |
| 8 | -50.4 |
| 9 | -56.7 |
| 10 | -63 |
What would invalidate the reading?
A backtest fills every entry and exit at midpoint or selects only executed winners. The resulting edge may consist entirely of impossible prices.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
What is the critical failure to avoid?
Reveal the worked answer
A backtest fills every entry and exit at midpoint or selects only executed winners. The resulting edge may consist entirely of impossible prices.
Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome.
Return to the question: What must a very small target overcome? State the observed facts, the assumptions and the failure condition separately.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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