Weekly Options – Benefits
Four Benefits That You Get Out of Trading Weekly Options
Many traders actually love the concept of weekly options as compared to the monthly options. But, what is it that they love about them?
What Are Weekly Options?
If you are wondering what weekly options are then it is best if we define it first. So, what are weekly options?
Weekly options are commonly known as “weeklys.” These are options that are listed that have around a week before it expires. This is different from the traditional options because the traditional ones have the entire month or even an entire year before it expires. The series for this type of options are listed every Thursday and they expire on the Friday of the following week. However, there will be no weeklys that are going to be listed that would expire on the same expiration week as that of the standard options which is on the third Friday for each month.
Generally, weekly options are the same with standard options when it comes to contract specification. They also offer the same two sided quotes that are continuous just like that of standard options. They also carry the same rights and obligations as standard calls and puts have but with shorter time frame for expiration.
Trading Weekly Options
Trading weekly options has become very popular among investors these days. There are four advantages that you will get out of trading them and this may be the reason why many investors are opting to trade them instead of the monthly options.
- Low Price Trades. You can trade weekly options at low prices. The concept here is not about the theoretical value but the real thing. Generally, these weekly options cost far less than the monthly options. They actually have lower price because of the fact that they have shorter expiration time frame. Another thing is that traders will only have less time for a stock or index to move in the money. There may be traders who do not understand how quick it would be for the out of the money options can fade. As for this type of traders, they consider weeklys as a way to lose money quickly. However, for the traders who are expert in knowing how to actually hedge the position of these weekly options, they actually consider that weekly options are representations of an extra opportunity to gain profit.
- Rapid Delta Swings. Another advantage that you will get from trading weeklys is the fact that weeklys undergo rapid delta swings. However, weekly options are not advisable for those traders who are quite conservative when it comes to trading because of the rapid delta swings. Weeklys are considered great tools for traders who love to gamble. The reason for this is that with long term options a slow delta swing is experienced. This is because the gamma is small and also because of the fact that the prices of the options does not dramatically change when the options move from out of the money position to an in the money position. When weklys are considered, the gamma is unstable because there is just little time in a weekly option’s life. The options can definitely experience a dramatic change from an out of the money position to an in the money position. The price of the option also changes dramatically and this is great for those traders who love to gamble.
- Better Play. Weeklys also offer a better way where they can play the news. By the time that there are companies who are about to announce their earnings, traders will begin to speculate and anticipate the likelihood of the moves that are going to take place in the stock price. Before, options tend to become rather pricey before the news because of the fact that there are actually more buyers than that of the sellers. This can be true when weeklys are considered. However, with weeklys the price increase is not that much as compared to the longer term options. They are just priced at a certain amount that traders who loves to take risks are willing to pay. Once the news is released, the resulting drop will have little effect on the weeklys. Weeklys have a simple concept which are winning or losing. With long term options, their value decreases. But with weeklys’ short expiration time frames, the results will just be your options will be worthless or it moves in the money.
- Most Actively Traded Stocks. You will not have a hard time looking for weeklys because they are rather listed on the most actively traded stocks. The list of the weekly options that are available changes every week. You check out the list at the website of CBOE. CBOE are listing options that will attract a large trading volume. Basically, stocks with high volume are on the list
To learn more about trading weekly options – be sure to sign up for our free option income email newsletter by clicking here