# Scalping: the execution hurdle

**OPT-11 · Core Options · Core**

**Lesson question:** What must a very small target overcome?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** OPT-F01, OPT-F02, OPT-F03, OPT-F04

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.

## Graph: Scalping: the execution hurdle—worked comparison

**Horizontal:** Unchanged-quote round trips  
**Vertical:** Cumulative example loss (USD)

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/options-strategies/OPT-11.js` and displayed as an accessible table in the HTML lesson.

## 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

### What is the example's unchanged-quote round-trip loss including 1.30 fees?

**Answer:** 6.30 per contract.

**Why:** Five dollars of spread plus 1.30 fees.

### What is the critical failure to avoid?

**Answer:** A backtest fills every entry and exit at midpoint or selects only executed winners. The resulting edge may consist entirely of impossible prices.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: What must a very small target overcome? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [OCC Options Disclosure Document](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document)

- [OIC Strategy Reference](https://www.optionseducation.org/strategies/all-strategies-en)