Before discussing the various trading strategies that can be built with weekly options, it is important to go back and review some of the more important trading terms.
2) Offsetting positions can be taken at certain times during the month between weeklies and monthlies. 3) You could take a position in the monthly contract and take rolling positions in the weekly contract in the opposite direction. 4) The last approach to using weekly options is to use them to supplement income from an underlying position. Rumors have been floating around the web about the possibility of daily options as the next logical product for traders.
Kirk Du Plessis is a full-time options trader, real estate investor, stay-at-home Dad and personal coach.
I don’t understand the following remark because the options exchanges do not offer new weeklies with the same expiration dates as the monthlies.
I have been testing weekly strategies more and more as the grow in popularity so that maybe a new focus this year.
Weekly options are exactly what they sound like - option contracts that are made available and expire on a weekly basis.
You would choose to trade weekly options for many of the same reasons that you would normally trade options except that you are looking for a shorter term trade. These weekly options can be employed in various trading strategies to manage both the theta and delta risk associated with options expiration. Because they do not remain open as long, the may involve somewhat less risk, but it is important to consider liquidity constraints, as many weeklies have smaller markets. When the options expiration of the monthly contract is nearly identical to the expiration of the weekly option, there may be a price difference that can be captured between the two. You can grab his completely FREE 12-Part Video Training Course which will help you discover how to trade options for consistent monthly income. Ideally, this shorter term trade will allow you to maximize your value versus trading a longer dated option contract.
Overall, the growth in weekly options can provide a richer strategy platform that should not be overlooked.
Most of these weekly options start trading on Thursday and expire the following Friday. This provides uniformity and also allows traders to easily “roll” weekly options from one expiration to another. Add your comments below and let me know if you would ever trade a daily option that started trading in the morning and expired that same afternoon.
He was recently featured in Barron’s Magazine as a contributor to their Annual Broker’s Review and is the Founder and Head Trader here at Option Alpha. For example, if there is an earnings release coming up in the next few days and you want to speculate on the price movement of the stock following the announcement, you may get better value from a weekly option than a regular option contract with a later expiration date. Rather than buy another full monthly contract, just use the weekly that is close to the monthly expiration to partially hedge the risk until expiration week.
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