Hello Everyone,I was wondering if traders here have made money scalping. I have run hundreds of simulations, across expiries, flattening delta at various points using actual market data for as long as a month but still havent been able to generate a profit. Seems the realized volatility is not enough to cover my costs.Any inputs?TIA

what asset class are you talking about?are you just trading close to close? if no-one could "scalp" well enough to at least break even then surely the option is too expensive and therefore should be sold right and therefore its price should be a lot lower? also, what time period is your historical data over?

I'm using equity options with a month to expiry. I have used one month's data and run the simulation for an entire month - long gamma and scalp with flattening deltas with various deltas.I agree with you that people must make money scalping, and hence looking for some pointers.

1. given whats happened in the market over the last month/two there may be a substantial vol risk premium and therefore even if the index has been moving around a lot you've paid too much for the options.2. are you measuring your vega P&L too?3. What transaction costs are you assuming? maybe you are too punitive?4. Are you just simulating the index path based on a GBM? If so, I assume you are varying your realised assumption?ps I am have very little experience with equity but these are the things I'd check

Thanks a lot for the inputs. 1. The data i have is before this rout started2. No, will do3. Not too high, realistic only. 4. I'm using actual market data - only market impact is while flattening the delta's which is infrequent and the market is liquid. So the impact is not too high anywayWill do the P&L again and come back.Thanks a lot for the inputs.

ok I'd start by doing 4 - just to make sure that given some very volatile "simulated" path your code/model can actually generate a profit - just to make sure that there is no error in its set up.also I would try to price an option on this underlying using this simulation and the gamma trading set up. make your hedge frequencies as close together as possible and see if your gamma trading p&l is equal to an option price using your realised vol assumption (obv over 1000s of simulations).

Here is my 2 cents worth - remember that any advice may be worth no more than you pay for it. Since delta hedging in practice cannot operate within the idealized theoretical world (and it would not be fun or profitable if the world were like that!) it turns out that delta hedging is a somewhat risky activity and one is essentially taking a market view of some sort whenever one makes a hedge re-balancing decision. Maybe you have just not yet found the right combination of views when applying your hedge rules. Another way of saying this is that profitable trading is really not an easy thing to do and one has to count on their experience and gut instinct as well as models. It is very hard to simulate this activity because the many things that can contribute to gut instinct (e.g. world view, intimate knowledge of markets and the competition, related news reporting, etc, etc) are never found simply within historical financial time series. What I am trying to say is that in simulations using only historical financial data, you do not have the full information set that any trader would have available in the real world in real-time. Does that make any sense? Having said this, I think simulation activity is still valuable because you can at least play with one parameter at a time and get some sense of hedge profit and loss partial sensitivities. Think of the exercise as a way to hone your skills but don't expect to put the puck in the net using it.