After another overnight gap-winner a funny “Gap-Straddle” strategy on two different accounts came into my mind, especially for weekend gaps in the actual situation, would be interesting what other speculators think about it:
I open for example on first account 100 EUR long position sp500cash shortly before end of trading session this Friday and on the other account 100 EUR short position sp500cash also shortly before end of trading session. If there’s a good gap long or short on Monday opening it’s no problem to cover with the profit the total loss of the other account.If there’s no gap or just a small gap it’s up to me what I further do.
Doesn’t sound bad?
I asked already my broker if opening contrary positions on two different accounts are allowed
No, I open long and short position on two different accounts- so if sp500 moves strongly in one direction, the other position on the other account is stoped out, and the right position drives in the profit.
I speculate on a gap that returns more than 100%, as it happened very often the last days, when you could gap in immediately after the opening more than 300%.
I think pending orders in such a mega fast price move shortly after the opening on Monday will miss the fixed entry price, because of slippage.
If I fix a pending order let’s say long sp500 at 2300 Sunday some seconds before the end of trading session and sp500 closed Sunday 2280, and Monday morning sp500opens with up gap 2500 I am sure the order is not triggered at 2300 but much worse cause of slippage.
I don’t think it’s a good idea. If you get a big gap between market close and open, you often get a big reversal candle immediately after as those stops are hit at market open. You could very well end up with both trades being stopped out.
It cant work bro. I must be missing something: can you please give exact examples.
If you buy and sell at the same time. Then when the market gaps up you wont be stopped out until the market opens after the gap due to liquidity so you’re still breakeven. You will only make money if the market keeps moving up which is a very risky move as normally after a gap, price reverses.
It’s not complicated, I worked out the last 4
weeks:
Left are the close and open priced my Broker’s sp500 quotations from one day to the other, than the gap points, red is the gap over the weekend. Right are the weekend gaps of DAX30.
Open a position with 100 EUR are 4 lot, one point so is 4 EUR profit, so I have opened a long position account 1 and a short position account two each 100 EUR , a few seconds before the close.
If you just look at the weekend gaps sp500 (red marked), you see each weekend this month brought good profit.
98 points with 100 EUR position is on the short position a profit of approx.400 EUR. On the long position a total loss of the 100 EUR position, cause stoped out.
So the result is a profit of 300 EUR.
There is enough time Monday morning to lock in the profit if you are at the beginning Infront of the screen. Two times I locked already profit in with a single position cause I was on the right side, (little bit lucky), never had problems with too large spread or anything else .
It’s clear- the worst thing that can happen is that sp gaps up, stops out the short position and before I can close long position sp moves down again and stops out long position- but that never happened last 4 weeks.
I have no idea how that system is profitable, because if you’re closing it immediately, then both positions cancel each other out and you have commission to pay.
But here’s what I’m saying with an example from last weekend on the DAX. Big gap downwards at start of trading, then shoots upwards for the rest of the day. Both positions would be stopped out and you lose money
No, you must take profit seconds after the opening in the first green candle!
in your example I would have made a profit because
Dax opens with a down gap- so immediately seconds after the opening I close short position and take profit!I My profit is the whole gap! I take profit in the first small green candle! Long position on other account does no more exist,because stoppt out seconds after the opening.
Don’t forget- i opened the long and short position on two different accounts seconds before the close of the previous day.
I don’t get it. Where does the one that got stopped out get stopped out?
So you open 2 trades on Friday at the end of market. Each has a stop loss of 100 pips. Monday morning, the market opens up with a 200 pip gap. One trade is up, the other is stopped out. Where do you think it gets stopped?
Now I think you got it- but I have not set any stop loss neither take profit. In your example let’s say sp gaps up 200 points Monday morning, the long position with 4 lot, that means margin 100 EUR lockt in immediatly 800 EUR profit, because with 4 lot position size it returns 4 EUR for one point.
The short position, also 4 lot that is also position size 100 EUR, was stopped out by the brokers stopout level, because after 25 points up this account was on zero. ( with this position size one point is 4 EUR, so after 25 points in the wrong direction account is on zero,)
So the overall profit is the full gap ( 200 pips multiplied 4, that’s 800,) minus the lost short position 100 , that makes 700 overall profit.
That could work, assuming there is a gap and assuming your broker doesn’t close Friday and open with an insanely wide spread, which does happen in volatile conditions. There is very little brokers haven’t accounted for these days.
Oh, you want to use a margin call to do this? Well that doesn’t work, unfortunately. Because you owe the broker the amount that your account is in deficit when the trade closes. You won’t be allowed to open new accounts with a broker until the deficit is paid, and in some cases they may chase you up for the outstanding balance.
If there was an easy way to do this, it would already be done. Brokers aren’t stupid.
deposited 10 EUR, took short before end of session position, and next day 09:05hrs closed gap profit 53 EUR
So gap trading in general seems to work properly with my broker
( ibut I don’t know wether he becomes suspicious if I do that 10 times on a row…)
Another thing to remember is that the gaps are usually much smaller than what we’re seeing right now. It’s possible you won’t make enough to get the margin call on either account, then you will have lost money for sure.
you are right, this idea came because of the actual volatil situation, normally such a game wouldn’t be very profitable, I guess
Anyway, I’m going to try it next week one time when there is a day for it.
