Glenn99, you are not entirely correct. Theoretically you are right but practically there are loose holes to exploit. You purchase a sold call from the market maker - the market maker may immediately sell a put to delta hedge, but he doesn't necessarily have to sell anything (delta's will be in equilibrium, but IV's will most probably not). Market makers may also opt to hedge IV's or exploit other opportunities like gamma theta and vega in front of hedging delta. Sure the position will not yield the returns of a naked position, but the game is to hedge the obvious and exploit other sensitivities or weaknesses. It just depends how in tune the trader is. Personally, I don't trade this way because I require equipment such as a live feed that caters for sensitivity co-efficient that will update sensitivities live - I have been following the ETO market very very close and trading naked positions daily for a few yrs. Once the live feed is available on the ASX mkt, then I can effectively trade the way I want and comfortbale with. there is no holy grail and in my humble opinion a coin flipping trading system can yield traders profits if they implement a disciplined stop loss.
