Ten Reasons To Trade Weekly Options

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Where can i trade weekly options tuned for Part 2 where we discuss where can i trade weekly options to easily and efficiently identify attractive weekly options trade candidates every day….

Weekly options provide traders with the flexibility to implement short-term trading strategies without paying the extra time value premium inherent in the more traditional monthly expiration options. Thus traders can now more cost-effectively trade one-day events such as earnings, investor presentations, and product introductions.

Flexibility is nice and all, but you are probably asking yourself, what specific strategies should I use to generate weekly profits from weekly options? Looking to generate some extra premium income in your portfolio? Well look no further, I have the strategy for you: Weekly Options Covered Calls. In essence, what you are looking to do in this strategy to is to sell weekly call options against existing stock holdings covered calls or purchase shares and simultaneously sell weekly call options against the new stock holding buy-write.

The weekly expiration of the sold call options allow you to collect additional income on your position, similar to a dividend but paying out each week. Over time the covered call strategy has outperformed simple buy-and-hold strategies, providing greater returns with two-thirds the volatility. Because of the exponentially high time decay in weekly options, most traders prefer to sell weekly options and understandably so. In the covered call strategy highlighted above traders are able to collect the rapid time decay by selling the weekly calls against a long stock position.

Selling naked puts, in theory put-call parity is equivalent to a buy-write strategy though skew and margin requirements alter the picture a bit. This is a phenomenal way to take advantage of option leverage and limit decay. Credit spreads are popular because they allow traders to sell upside call spreads or downside put spreads levels with a locked-in risk-reward from the trade outset.

Unfortunately without the underlying stock, this where can i trade weekly options call option sale would require a substantial amount where can i trade weekly options margin within your portfolio, as the maximum potential loss on the trade is theoretically infinite. However, you can reduce the max potential where can i trade weekly options and margin requirement by simply purchasing a higher strike call i. Weekly Options Calendar Spreads: Remember that a calendar spread is a two-legged spread constructed by selling a shorter dated option and buying a longer dated option.

The profit engine is the relatively faster decay of time premium in the shorter dated option. Calendar spreads reliably achieve their maximum profitability at the expiration Friday afternoon of the short leg when price of the underlying is at the strike price. Prior to the recent availability of these weekly options, calendar spreads were typically constructed with around 30 days to expiration in the short leg.

Hit and run calendars differ in risk somewhat. Volatility moves rarely occur at anywhere close to the rapid pace of price movement. Because of this characteristic, the primary risk in these short duration calendars is price of the underlying. The occasional occurrence of spiked volatility in the short option significantly increases the probability of profitability as the elevated volatility decays to zero at expiration. One of the very liquid underlyings that has actively traded options is AMZN.

A quick look at the options board showed the weekly strike option, having 4 days of life left and consisting entirely of time extrinsic premium, was trading at a volatility of This situation is called a positive volatility skew and increases the probability of a successful trade. I continued to monitor the price, knowing that movement beyond the bounds of my range of profitability would necessitate action. By mid day on August 31, 48 hours into the trade, the upper limit of profitability was being approached as shown below:.

Because price action remained strong and the upper breakeven point was threatened, I chose to where can i trade weekly options an additional calendar spread to form a double calendar. This action required commitment of additional capital and resulted in raising the upper BE point from to a little over as shown below. Hit and run calendars must be aggressively managed; there is no time to recover from unexpected price movement.

Shortly after adding the additional calendar spread, AMZN retraced some of its recent run up and neither BE point of the calendar was threatened.

I closed the trade late Friday afternoon. The indication to exit the trade was the erosion of the time premium of the options I was short to minimal levels. The results of the trade were a return of If the second calendar had not been needed to control risk, the returns would have been substantially higher. This is just one example of the use of options in a structured position to control capital risk and return significant profit with minimal position management.

Such opportunities routinely exist for the knowledgeable options trader.

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Put on a weekly iron condor trade Why does it seem like such a "layup" trade until you actually try to do it in real life? Since weekly options were introduced, more and more trading volume continues to shift towards shorter duration options. And when you get a lot of people leaning one way, it drives the premiums on those options lower and lower.

That means you, along with countless others, will be chasing smaller rewards and taking larger risks. So the question you need to ask yourself Is the "juice" worth the "squeeze? With about a week to go, this iron condor trade gives you. You've got about 30 points of upside buffer, and then about 45 points to the downside. Right now the market is trading about 14 points a day. So all you need is a 2 day rally, and you're nearing your upside risk limit.

And all it would take was one more pop and you'd be in serious trouble. This is a short term iron condor with an embedded stop inside of it. Unlike many iron condor traders out there, we believe that iron condors aren't just "set and forget" trades. You need to have some kind of risk management setup. Basically, we look at putting on an iron condor about 30 days out, and look to hold onto it for 2 weeks.

This is an iron condor for a credit of 0. Our profit target is to pull out 0. That will happen if the market rallies to or sells off to We want to be out of the trade in about two weeks. Here are the results from some of the trades beginning in This was from just one iron condor, and this setup can easily scale up to 20 iron condors.

Then it's a system with the odds on our side. Learn More About Iron Condor Trading We've put together a free iron condor toolkit for you, so you can see our approach to income trading and you'll get some of the resources that we use on a daily basis.

I've put together an Iron Condor Trading Toolkit that gives you the case studies and training needed to be consistently profitable in the market. Click Here to Get the Toolkit. It sounds sexy, doesn't it? Yet from many clients I've worked with, they've been burned on this exact trade Let's take a look It's a Crowded Trade Since weekly options were introduced, more and more trading volume continues to shift towards shorter duration options.

A lot of people out there chasing short options. And as long as the market stays above and below , then you make money. Well, let's think about this for a second. If you want to earn faster returns with iron condor trading, there is a way A Better Approach Weekly options give you the promise of "instant profits" with a hidden cost.

What if I told you there was a better way to earn quick profits? Here's a live trading example: The math ends up being simple.