Learn the trade here. Make it on tradeMONSTER

Options Trading News

January 21, 2013  Mon 4:40 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
In a world of ever-increasing speed when we view things in ever-shrinking blocks of time, the success of Weekly options should come as no surprise. The popularity of these contracts has risen so fast that they may soon eclipse the more traditional option expirations.

That's why we have created a special page dedicated to these short-term contracts.

optionMONSTER's Trading Weeklies page focuses exclusively on this "fastest money" in the option market. It allows you to look at the top volume contracts as well as sort by calls and puts, stocks, or exchange-traded funds and notes. The page provides pricing, volume, and open interest for the top Weekly contracts

Weekly options have taken off in the last year or so, and their growth continues to surge as exchanges add and alter the way they are traded. In September the International Securities Exchange added 50-cent strikes to the Weekly options, which previously had traded in dollar-wide spreads.

And the Chicago Board Options Exchange is now listing up to five consecutive expirations for Weekly options. This is limited to a handful of heavily traded names so far--including the SPX, SPY, IWM, EEM, QQQ, GLD, SLV, XLF, AAPL, and GOOG--but will likely be expanded.

If you haven't already discovered the advantages of Weekly options, they are manifold.

When you buy or sell options, you are in many respects buying or selling time. The more time you buy, the more you pay. But with most options bought around a specific time frame, such as earnings season, buying additional time can be a waste of money.

Many traders want to hold an option only through an event, but longer-term contracts carry higher premiums that force traders to put more capital at risk. Weekly options solve this problem because they have less excess time, which in turn lowers cost. That lets traders buy strikes that are closer to the money and have a better chance of making a profit.

The time premium of an option loses value as the contract moves toward expiration, and it does so with accelerating speed. So the last week of an option's life has the most time decay.

This can be great for option sellers who are looking to collect that theta. Most sellers have a sweet spot in the timing of their trades, and now they don't have to wait for it to roll around just once a month.

The best example of this comes in index and ETF options right now as the end of the year and the so-called fiscal cliff approach rapidly. If we go off the cliff, we won't really know about it until Jan. 1, and the regular monthly January expiration comes on Jan. 18. But with the Weekly options, you can buy the contracts that expire on Jan. 4, saving the cost of two extra weeks.

And dynamic traders or option sellers might take advantage of the time before the end of the year by selling Weekly contracts that expire before 2013 begins. More advanced traders may take advantage of both sides of this time frame with calendar or diagonal spreads.

The latter strategy--which entails buying and selling options at different expirations to take advantage of higher premiums in the longer-dated contracts--can offer some of the greatest opportunities in Weekly options.

We hope that you can take advantage of these and other strategies with the help of our new page!

(A version of this article appeared in optionMONSTER's Options Academy newsletter of Dec. 20.)
Share this article with your friends


Related Stories

SPX

Stocks pause after quick rebound

October 22, 2014

S&P 500 futures are essentially flat, while most of Europe is higher by less than half a percent. Most of Asia rallied overnight, led by a 2.6 percent surge in Tokyo.

SPX

Earnings, mortgage data on docket

October 22, 2014

Boeing, Dow Chemical, EMC, Ingersoll-Rand, General Dynamics, and Norfolk Southern announce their results before the opening bell.

SPX

Stocks higher on sentiment, earnings

October 21, 2014

S&P 500 futures are up 0.6 percent, while the Nasdaq advanced 0.9 percent after strong iPhone sales caused Apple to beat expectations. European markets advanced by 1.5 to 2.3 percent.

SPX

Agenda keeps focus on earnings

October 21, 2014

McDonald's, Coca-Cola, Lockheed Martin, Verizon Communications, United Technologies, and Harley Davidson release their numbers this morning.

SPX

Futures follow Europe, IBM lower

October 20, 2014

S&P 500 futures are down about 0.2 percent. Frankfurt, Paris, and London are all down more than 1 percent amid poor quarterly results, weak trade numbers, and persistent deflationary pressures.

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Free Webinars

Make Money in a Volatile Market

Education & Strategy

Vexed by the VIX

Many people probably don't know that the calculation changed for the CBOE Volatility Index this week, but it's worth discussing...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER