Options trading is taking the stock market by storm. Long gone are the days traders relied on traditional stock trading exclusively. The benefits and convenience of equity options allow traders to maximize potential returns and minimize potential losses.
Amidst the many different types of options trading lies weekly options. Weekly options are quite similar to standard options, but primarily differ in terms of their expiration date. Weekly options expire on every Friday except monthly options expiration Friday. Also, though weekly options can be highly volatile, the right strategy and timing can make utilizing weekly options incredibly profitable.
If you are just stepping into the world of options trading, and specifically interested in weekly options, there are a lot of common mistakes you're likely to make if you go at it alone. To start, we have prepared the ultimate guide for you to trade weekly options without making typical beginner mistakes. Also, don't miss out onSchaeffers options trading alerts,which can give you an edge in your trading with real-time entry and exit instructions. By utilizing Schaeffer's weekly options alerts, traders can work side-by-side the experts in options trading for over 40 years and learn while simultaneously making money.
What are Weekly Options?
Options are contracts that provide the owner with the right sell or purchase at a set price and date. Weekly options are very similar to standard options but are shorter term in nature. The short-term focus of weekly options allows quick, cheap, and targeted responses to small moves in the underlying equity without buying a bunch of time. Weekly options have a week's worth of value before expiration that comes every Friday.
Weekly options allow traders to keep up with the fast-paced stock market by allowing traders to buy and sell weeklies as positions expire out-of-the-money (OTM), worthless, or in-the-money (ITM) with the option's intrinsic value at expiration. Weekly options involve a a lot of precision in execution, but you can trade weeklies on a regular basis and get the maximum benefit from it if done properly. Plus, your money won't be tied up for a long time due to the short-term nature of weekly options.
Weekly Options vs. Monthly Options
Weeklies stand apart from standard options primarily due to the short-term nature of weekly options. Traders who were previously limited to 12 options expirations in a year when trading monthly options can now enjoy up to 52 options expirations every single year. Expiration dates are a crucial aspect for traders when finding a trading opportunity as expiration dates can impact the potential room for turning a profit or risking a loss. The closer expiration date makes weekly options trades cheaper than monthly-expiring options.
Weekly options are simple to trade and offer the same leverage and convexity as monthly options. In fact, in a way even more leveraged than monthly options, traders can profit off of on predictions of very short-term stock price movement in the underlying stock.
Weekly Options and Volatility
Volatility is something traders absolutely always need to keep top of mind whenever trading options at all, especially weekly options. If you aspire to be a short-term trader by making four trades per month, you should seek to trade with experts who are well-versed in minimizing options trading risk, as well as those who are skilled in strategically capitalizing on volatility.
Trading weekly options with big potential returns also comes with the potential for facing high volatility. Greeks and time value are two components a trader needs to keep in mind when considering entering a weekly options trade. Greeks have a direct impact on the value of options contracts, dependent on the stock price movement and providing indications for how long the weekly options contract should be held.
While trading options might seem more intense than stocks, options trading can also maximize profits with much less capital at risk. As with any investing or trading approach, it is essential to keep yourself updated on the latest news and work within a defined money management guideline.
Weekly Options Trading Strategies
From buying call and put options to selling call and put options and everything in-between, choosing the correct strategy for optimizing the usage of weekly options can position traders to profit trading the appropriate strategy given the trading opportunity. Weekly options provide traders with plenty of opportunities to make money regardless of what the stock market is doing. The biggest advantage of trading weekly options in lieu of stocks is traders can profit regardless of where the market is headed (up, down, sideways, etc.).
Getting Started Trading Weekly Options
As with anything new that may impact your financials, it is critical that you take the time to learn about important factors that impact options trading in general, before diving specifically into options trading. Here is a list of some of the terminology that is critical to understand prior to trading options:
- Leverage
- Volatility
- Option Pricing
- Open Interest
- Option Greeks
Be sure to take the time to learn about these key concepts. After you have mastered these concepts, start digging into the pros and cons of utilizing different options trading strategies. Once you have a better understanding of how options work and how different strategies can produce different results, work with an investing professional to define your plane.
The product specialists at Schaeffer'sInvestment Research are always a phone call away at 800-448-2080 for a complimentary consultation on our three weekly options trading strategy trading recommendation services. Find the trading approach that works best for you - we are here to help.
