Weekly Options – Get These Weekly Resources!

Weekly Options Resources

Whether you are trading weekly options or option trading strategies with standard monthly options – or even longer term leaps – here are a couple of great resources that all option traders should be aware of to help ‘better’ their game.

Each of these are from the CBOE – which can be found at cboe.com – which is a huge ‘rich’ site with tons of option – and ‘option income’ trading resources and content.

Among this great content – especially important for weekly options traders – is the resources that are available that describe in detail how option trading settlement procedures work – such as when and how they finally settle (for example standard american style options vs. european style options – along with the new SPXPM options, etc)

The CBOE offers a free excel download of the weekly options every week that they come out. You just go to their website and download the new list of weeklys every Wednesday. It comes available to download in an excel sheet with a lot of data for each underlying that has the current weekly options available on – which you can sort, slice, and dice in a variety of ways to help you make better decisions on which trades to make.

You can also subscribe to an email from the CBOE that will keep you up to date with the new weekly options as they come out. You can have them sent directly to your email box rather than having to head over to the site and look them up.

And also – there are literally hours and hours of great options trading educational that can be accessed for learning.

For a carefully put together list of the VERY BEST of these option trading educational programs and videos (there are so many that it is definitely worth your time to get this list and cut right through all the ‘not so amazing’ stuff) be sure to visit our options resource center inside our FREE options trading members website – or just email us and we sill send you the .pdf.

To join our free weekly options / options income members trading website CLICK HERE

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Posted in CBOE, CBOE Weeklys, Weekly Options, Weekly Options Strategies, Weekly Options Trading, Weekly Options Windfall | Tagged , , , , , , , | Comments Off on Weekly Options – Get These Weekly Resources!

Weekly Options – SPX ‘PM’ – There’s a New Option in Town

Weekly Options – SPX PM

There’s a new weekly options trading vehicle in town based on the SPX called the SPXPM.

Traditionally the SPX options expired on Friday mornings along with options on other major indexes like the RUT. For us option income traders, who like to trade credit spreads, iron condors, butterflies, etc – this Friday morning settlement always caused potential problems and headaches as we never really knew where the underlying would ‘finish’ trading at.

For example if we were playing an option income trading strategy on an underlying like the SPY or a stock – we could literally take the trade right into expiration without necessarily having to take the trade off. If we were able to watch the market – and if we felt nimble enough to get out of the trade if we suddenly had to – we could simply watch the underlying tick away into the final moments of expiration and if were safely ‘out of the money’ we could simply let the options expire worthless without having to pay extra commissions to take the trade off.

Not so with the bigger indexes like the RUT and the SPX. These options expired on Friday morning – at the ‘opening’ price. The final ‘number’ where the underlying came in at based off of an aggregate of a total of all the stocks in that underlying – based at where they opened Friday morning.

This ‘opening price’ settlement makes it impossible to make any sort of hedge or adjustment based on where that opening ‘settlement’ price came in at – presenting a situation where if we decided to take a trade into expiration on any of these indexes – we were really pretty much gambling and hoping that some sort of bigger than an expected move – or gap – wouldn’t occur to suddenly take a trade that was ‘out of the money’ – ‘into the money’ – and into an option trading loss.

In fact, I know of many option traders who would take their SPX or RUT positions and hold them over Thursday expiration night – thinking that they were clearly ‘safe’ and in a winning trade – only to have a huge opening move – or gap – throw their trades into  a major loss – without them being able to do anything about it.

Enter the new SPX PM options.

This new option trading product is the same size as the SPX, is electronically traded and expires on Friday ‘PM’ just like other ‘normal’ stocks.

And it comes in a weekly options version too.

This is a great addition – allowing us option income folks more ‘options’ in trading the SPX and playing it right into the close without having to exit early or be subjected to an ‘unknown’ type of settlement like the older SPX and RUT options present.

Now – they need to do the same thing with the RUT.

To learn more about a very SIMPLE way to trade options for income that can be used with these new SPX PM options (as well as the older traditional SPX, RUT, and ETFs like the SPY, IWM, etc) be sure to join our free option income trading newsletter by clicking here.

To Learn More Join Our FREE Options Income Newsletter by CLICKING HERE

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Posted in CBOE, CBOE Weeklys, Weekly Options, Weekly Options Strategies, Weekly Options Trading, Weekly Stock Options | Tagged , , , , , , , , | Comments Off on Weekly Options – SPX ‘PM’ – There’s a New Option in Town

Weekly Options – The Myth Of Weekend Time Decay

There is a new article on weekly options in our free members resource area (link can be found in our free members area resource area – join our free option income newsletter by clicking here) – that talks about when is the best time to place a weekly options trade.

Selling option premium is what is being talked about – and covered are two possible scenarios – either placing an option selling trade (like an iron condor, butterfly spread, calendar spread, etc) as soon as the new weeklys are introduced on Thursday morning – or waiting until towards of the end of trade day on Friday right before the market closes.

The argument is a bit skewed towards waiting until end of day Friday – and place the trade right before the market closes – with the thought being that the sold options will be allowed to decay over the weekend as if they will continue to decay at the same daily rate while the market is closed and there is basically no risk on any movement.

This sounds nice in theory – however for those of you who might have tried this you will probably agree that that is not exactly how it works. Too many times I have closely watched the profit and loss levels of these types of option positions from the end of day Friday until the opening bell on Monday – and have not found any decay at all. It’s the same as a normal one day change – because the market makers adjust the pricing on Friday afternoon to take into account the closed weekend days.

I do wish it were that easy, however, unfortunately there’s still no free lunch on Wall Street.

In my own experience I have found best results with placing my theta positive ‘option selling’ strategies on Thursday – the same day they come out – about two or three hours into the trading day.

I DO usually find a significant decay happen over that first day period – and if by Friday afternoon at market close, if I still haven’t reached my profit targets on my iron condor, butterfly spread, or calendars – I will usually carry them over the weekend.

To learn more about a very simple way to trade options for income, be sure to join our free option income trading newsletter by clicking here.

To Learn More Join Our FREE Options Income Newsletter by CLICKING HERE


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Weekly Options – Quick Cash Infusion

One weekly options trading strategy I like to use is to mix selling weekly options in with my traditional monthly income trades.

For example, last month in our Options Income trading lab we had on a monthly iron condor trade. This trade was just a standard ‘vanilla’ type of iron condor – however due to the big run up we have seen in the stock indexes over the last month we did have to employ some adjustment strategies to the upside.

At one point in the trade our position was lopsided as we had bought back all of our put credit spread trades and only had on a hedged call spread above where the underlying was trading. When we got to the weekend – Friday (this was with a few weeks still to go until option expiration) we realized we had an opportunity to bring in some additional credit / premium to help out our trade.

Normally at this point – before the weekly options were around – we would consider selling some same expiration monthly put spreads agains the position over the weekend to try and bring in a quick short ‘cash infusion’. The thing with making that type of trade however, is that there is still some good time / life left in those monthly options and if the underlying were to quickly start moving down we could find ourselves in a position where we would need to begin managing those new put spreads – and even potentially baby them all the way until expiration.

We were just looking for a quick ‘over the weekend’ cash infusion – where we could sell a few put spreads – bring in some additional credit – and then get out of them early in the next week.

Weeklys are perfect for this. True, you may not get as far away from the money as you might with the monthlys – but the weeklys will decay so quickly – if you place the trades appropriately most likely you’ll be able to get your ‘quick cash boost’ and then get out of the trade before any heavy duty management needs to be done.

To learn more about our unique way of trading options be sure to join our free options income trading newsletter by clicking here

To Learn More Join Our FREE Options Income Newsletter by CLICKING HERE

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Weekly Options – Getting Out Early

When I first began trading weekly options, and the various option income trading strategies like the Iron Condor, Credit Spread, Calendar Spread, and others – my overall plan was to just not touch the trade and just leave them on all the way to the very end.

For example, after I put the trading position on, I’d just leave it alone until expiration day rolled around and let the options simply expire without any value and vanish into ‘options trading heaven’.

My thought on this was that this was that it was really the wisest choice – and the best way to go – because it would allow me to keep the entire credit received – and I wouldn’t have to pay any dealer commissions to close out the position.

But things have changed – and I certainly don’t think this way anymore.

After spending far too many sleepless nights, experiencing a lot of ‘close calls’, and even getting close to acquiring an ulcer or hernia or two, I’ve transformed the way I run my options trading business.

Now – immediately after I place the trade, I place a contingent order with my dealer to repurchase the call spread – and the put credit spread – as soon as I’ve generated the majority of the revenue in each of the individual spread trades.

For example, if I placed an Iron condor trade on SPX  for a total credit intake premium of 1 dollar  – or fifty cents  each spread  – I would immediately configure a contingent order to buy back  the call spread for five cents or .10 – or perhaps even twenty cents. Then I would go over and do the same thing on the put side.

Think this is crazy?

I don’t think so.

Sure I may make less than if I tried to milk the option trade all the way through to the very end of expiration.

But that’s not necessarily true.

And even if it were – it’s not really THAT much less.

What I think is far more important – is that by re-purchasing those spread trades, I have ‘locked in’ the majority of the gains.

In addition, my overall risk in the trade has been reduced.

Furthermore – I’ve set up a situation where it’s now possible to generate ADDITIONAL profits in this trade – more than what I had even hoped to gain when I first placed the trade. And I’ve done this with out adding to the initial trade risk.

Here is a situation using a monthly option income trading strategy to better explain what I mean:

As you’ve probably experienced yourself while trading options, a lot of times while a trade is on, the value in the options can lose value quickly. It’s very possible for a spread trade to lose the bulk of it’s value in just a few days.

So let’s say I place an iron condor trade on the SPX at around 40 days or so until expiration day. And I bring in a premium from the trade of around a dollar and ten cents – or fifty five cents for each credit spread side.

Then lets say that right after I got into the position, the SPX started to make a quick move upwards.

Just a couple of days after getting into the trade, it is possible for me to close my put credit spread for around .11 cents.

Now here’s the thing – if I decide to do absolutely nothing and just let the trade ride – I am deciding to accept that put credit spread risk margin – for the 37 days – for that little pathetic eleven dollars of potential profit left in that side of the trade.

Or – I could instead repurchase that put spread – close it down for just .11 cents – and LOCK IN that profit I have already made in that side of the trade in just a few short days.

Furthermore – if after I do close down and get out of that put spread – if the SPX were to suddenly fall back down – I could care less as I have no more risk whatsoever on the downside.

And actually – if the SPX were to drop back down far enough – I could actually place the EXACT same put credit spread I placed at the very start of the trade – very likely for close to, if not the same more, credit premium I received at the start of the trade. This would allow me to increase my total return on investment for the trade WITHOUT adding to or increasing any of my initial risk I had on the trade.

OR – even if I didn’t place any addition trades – let’s say I just decided to buy back the original credit spreads for eleven cents. I think that this by itself is a much better choice than allowing the trade to run until the end. It brings down my overall risk in the trade – it gives me back my trading capital much more quickly – it boosts my return on investment in regards to the number of days spent in the trade – and it frees me from the market a lot sooner that if I decided to hold out to the expiration day end.

This way of trading option income strategies makes much more sense to me.

And I’ve found it to be way less stressful. And much more enjoyable too.

To learn more about our unique way of trading options be sure to join our free options income trading newsletter by clicking here

To Learn More Join Our FREE Options Income Newsletter by CLICKING HERE



 

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Weekly Options Trading For Great Granny Sue

 

In our last post that you can find here: Weeklys – How To Have Your Volatility Cake and Eat It Too – we showed some trading risk graph examples from an option income trade that we have been trading for years now with excellent results.

This is an option trade that can both generate consistent returns during lower volatility trading months – as well as provide solid ‘hands free’ protection from wild market moves during more volatile trading times. In fact, it can produce it’s BEST and HIGHEST option trading returns during huge, wildly swinging months and even market crashes. It’s the type of option trade that you can place every month – and during those few months were the market goes crazy and crashes – this trade can perform extremely well.

It’s also an option trade that can require very little time having to actually monitor the trade. Due to the way that the position is constructed through the specific combination of calls and puts – it is a trade that you could not even look at for days – and have complete confidence that the position will be okay.

Normally we option traders want to put on our typical option income trades (like iron condors, butterfly spreads, calendars spreads, double calendar spreads, diagonals, and ect) when the overall market is a bit more calm and not swinging around violently. The problem that comes up is when we hit a longer period of more volatile trading times like we’ve seen over the last few years – or even worse – when sudden ‘flash crashes’ occur causing huge sudden drops out of the blue that can potentially totally wipe out our ‘market range bound’ income trades.

Well this is trade that can be the perfect ‘tool’ to use in both / either scenario – as it can perform and accomplish out trading goals in either type of market situation.

It’s also a trade that can be be perfect for newbie option traders – who haven’t quite been able to wrap their heads around everything that is involved with trading options – like the option greeks, delta, theta, vega – calls and puts, etc. This trade has solid built in protection. It’s like an armored truck. While of course there is risk in the trade – at least initially – it’s an option trade that when set up and managed correctly it could be quite difficult to get badly hurt.

For example, if I had to set up dear old Great Grandma Sue in an option trade (and she knew very little or ‘nothing at all’ about options or option trading) this would be a perfect trade that I’d feel comfortable putting her in – knowing that the odds were WAY stacked in her favor that she’d make a great monthly return without having to do much of anything – and in the rare circumstances where it didn’t make her money and the trade wound up losing – the loss she would experience would be tiny in comparison to what would normally happen with a more ‘typical’ option income trade like a straight iron condor, credit spread, calendar, etc.

And even better – if a huge market crash were to occur – Great Grandma Sue’s trading account would explode in value – making her much more than she could ever hope to make with one of those more ‘normal, typical’ option income trades. And she’d make this money without having to be glued to her computer monitor and making all sorts of fancy trading maneuvers and adjustments. Other than closing the trade out and banking her huge windfall profit – she likely wouldn’t have to do anything else at all.

Keep an eye out for our upcoming posts where we will dive into these trades much deeper – and be sure to join our FREE option income trading newsletter for updates on these lessons as well as more info on how to learn more about this type of option trading.

To Learn More Join Our FREE Options Income Newsletter by CLICKING HERE

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Weeklys – How To Have Your Volatility Cake & Eat It Too

Here is a great option income trade set up / adjustment that we’ve been using & teaching now for years with GREAT results.

When set up and managed correctly, this type of option income trade can be a monthly income generating position that can be COMPLETELY IMMUNE to volatility risk.

Most option positions will have volatility risk. For example, a calendar trade can benefit if volatility rises. But – it can get hurt if volatilities decrease. On the other hand, a butterfly position can benefit when volatilities sink. But it can get hurt when volatilities rise.

Well, this particular option trading strategy is an income generating position that will benefit / profit when volatility goes up – as well as when volatility goes down. Either way volatility moves – up or down – this trade will benefit. And the trade will do well if volatility levels remain flat as well. Again, this is a trade that we have been trading and teaching for years now – and it has served us very well – especially in the more recent type of wildly moving trading months.

Typically option income positions like the iron condor, butterfly spreads, calendar spreads, etc perform their best when markets are calm and in more of a range bound mode. Wild fluctuating markets – like what we have seen over the last few years – can be disastrous for option income traders – and these types of trades – unless the one trading them has a good handle on how to properly manage and adjust the position – OR – unless they construct – or ADJUST – their positions in a way similar to how these trades are constructed.

These types of option income trading positions offer the best of both worlds. They can produce reliable monthly income just like the traditional iron condor, butterfly, and calendar spread type positions – WHILE AT THE SAME TIME – they can provide amazing protection from huge volatile moves, market drops, and flash crashes. In fact, they can thrive in stock market crashes – kicking out profits MANY TIMES GREATER than what was ever originally ever hoped for at the start of the trade. With this option strategy set up – you WANT the market to crash hard – as it can produce huge profits that dwarf your initial profit targets and even your max risk in the trade.

Again, this is an option position that volatility really can’t hurt. If volatility  SINKS, the trade will benefit profit wise. If volatility RISES, the trade will benefit. It’s the best of both worlds. You get to have your ‘volatility cake’ and eat it too.

Here are some risk graph screen shots from an example trade set up we created for the March 12 option expiration cycle to help better demonstrate the potential and incredible flexibility of this trade:

Click Image To Enlarge

In the above risk graph we see the position where the market is currently trading at – with current volatility levels. The position shows a current profit of $28.00 (the slightly curved white horizontal line towards the bottom of the graph). The hard horizontal red line at the top of the graph represents the expiration day total profit potential in the position: $1488.00. The total risk in this position can be seen under the words ‘BP Effect’ in the lower right hand side of the risk graph screen – total risk in the trade is: $13,512.00.

So, at expiration, if were to be able to capture the total amount of premium available in the position ($1448.00 found at the hard red horizontal line at the top of the screen) we would make just over %10 in this trade.

Now, lets ‘stress test’ this position from a volatility standpoint and see what happens if volatility levels were to suddenly DECREASE by %20…

 

Click image to enlarge

The above risk graph shows the exact same position with volatility DECREASED by 20% (see the ‘Vol Adj. -20.00%’ along the bottom right hand side of the risk graph window).

With the volatility decreased by 20% our current white profit and loss line (the white line in the graph) which represents our ‘current profit’ in the trade – shoots up to $1485.00 – just below our expiration max profit potential in the trade.

Now let’s ‘volatility stress test’ this option trading position in the other direction…

 

Click image to enlarge

Now the above risk graph shows the exact same position with volatility INCREASED by 50%. The risk graph above shows what would happen to this position if the volatility were to suddenly spike up by 50% (which CAN and HAS happened – for example the huge market crash that happened last summer in early Aug).

With the volatility increased by %50, the ‘current profit’ in the trade is now at $15,254.00 – SOARING ABOVE the red hard horizontal expiration graph line below that represents what would ‘normally’ be our max profit potential in the trade. The current profit in the trade is around 10X the amount we previously considered our ‘best case profit scenario’ – and represents over a 100% return on our total risk in the trade.

Now let’s rise the volatility levels even more…

 

Click image to enlarge

Now the above risk graph shows the exact same position with volatility INCREASED by 100% – which could also easily happen in a dramatic market drop or market crash.

Now our current white profit and loss line shows a ‘current profit’ in the trade of $41,390.00 – around 27 TIME GREATER then what our hard red horizontal would have given us at expiration had this been a ‘traditional’ option income trade – and almost a 300% RETURN on our total risk in the trade.

This is a great option income trade – and while the above example trade is built from monthly options – weekly options could be utilized / added into the mix as well.

This is a perfect ‘low stress’ trade for wild volatile markets where you want to generate income but might be concerned about a crash occurring – or you simply don’t want to be locked down to your desk having to watch your trading screen all day just in case you need to make necessary adjustments. Once the set up is complete you can walk away and spend very little time having to actually monitor the position. And – especially during wild swinging market times – you’ll sleep much better at night too.

This trade can be initially set up from scratch in this manner – or you can also take an existing ‘regular / traditional’ option income trading position like an iron condor – and just make a few simple tweaks and adjustments to it – and easily transform it into this type of an option play.

In upcoming posts we’ll include more detailed and expanded examples of this options trading set up  – some which we currently have on and working this month – as well as examples of how we used this strategy during the Aug. 11 market crash with amazing results.

In the meantime, be sure to join our FREE option income trading newsletter by clicking here

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Weekly Options Windfall Profits – Part 2

Weekly Options Windfall

In our last post (you can see it by clicking here: weekly options windfall ) we went over a weekly options / monthly options trading set up for a unique way to play a ‘pre earnings announcement’ calendar spread trade that can create great monthly / weekly options windfall profits.

In this post we’ll continue with the strategy, covering a bit more about the management and exit plan for the trade, as well as the risks that are involved with making this options trading play.

First, a quick re-cap of this options strategy:

This is a short term options trading strategy that could be played with either weekly option or monthly options. I would consider this more of a speculative trade than a consistent bread and butter income strategy – but, it could be played over and over again once the trader gets familiar with it and as long as they are able to find a steady supply of stocks that fit the criteria.

This is a pre earnings play. We look for a stock that is set to announce earnings right after one options expiration cycle ends – for example the week AFTER regular monthly options expiration.

With this trade we are trying to take advantage of the volatility skew that typically occurs when there is a news type event or an upcoming earnings meeting. Usually when there is an earnings meeting / announcement the volatility will rise in the options. This rising volatility will pump up the cost / value of the options and hold them steady until the earnings are actually released. Once the earnings announcement occurs, usually the volatility will immediately drop back down – dropping the cost / value of the options with it.

So in order to use this to my advantage, what I will do is first look for a stock that will be announcing earnings a week or less after one options expiration cycle ends. I will then purchase an option at or a near as I can get to the money – in the month that the earnings announcement will occur.

Then I will SELL an option at the same strike in the front month – the month where there is an options expiration cycle that ends BEFORE the earnings announcement.

Here is an example:

Let’s say that the current date is January 11 and that stock XYZ will have an earnings announcement meeting on Febuary 25.

The January options will be expiring on January 18.

Here’s what I would do. I would purchase the Feb option that is closest to the money. Then I would sell the Jan option at the same strike price – creating a calendar spread trade.

Since the January options will be expiring (and will no longer exist) by the time that the Feb earnings announcement occurs – those options will most likely decay at a normal rate and volatility will really not be an issue – due to the fact that the Feb earnings announcement will have no effect on those options since they will not be around at the time of the earnings announcement.

On the other hand, the Feb options that we purchased WILL be in play during the earnings announcement – and they most certainly WILL be effected by the upcoming earnings announcement. As the earnings date approaches, the volatility will very likely continue to rise and boost the cost / value of those options.

So, in the overall calendar trade, the front month options that we sold would decay at a normal rate without the earnings volatility really effecting them. The back month options that we purchased would likely RISE IN VALUE – or at least HOLD their value – at least until announcement day.

The difference – the SPREAD – is our profit – and due to the fact that the front month options are decaying while the back month options could decay very little – or actually INCREASE in value – this could be a HUGE return on investment – especially when you take into account that this is a very short term trade – most likely seven to ten days long.

Managing the Trade and Exiting

Now that we have the set up and entry, let’s look real quickly at how I would manage and get out of the trade.

Again, this is a very short term trade. Seven to ten days long. Of course, no matter what I would get out of the trade before the front month options expire or at the latest on expiration day (the day that the Jan options expire in the example above)

In this trade, other than volatility risk – there is price risk. I could experience a loss if the underlying made too big of a move before I realized my profit target – or the Jan options expire.

So I will set a both a profit target and a ‘max pain – max loss’ point at the time of entry. Personally I would set my profit target at ten percent – and I would set my ‘max pain – max loss’ point at the same – ten percent. So, once I hit a ten percent profit in the trade I would take it off. Or, on the other hand, if I hit a ten percent loss in the trade before reaching my profit target – I would just take it off for a loss. I want to keep these two targets the same.

While it’s important to remember that there is always risk in trading – this options trading strategy can stack a lot of odds in the traders favor and can potentially generate big profits – and they can be generated very quickly due to all these pieces working together. It’s just a matter of finding the right ‘pre earnings announcement’ set up and then of course correctly managing the trade.

To learn more of our unique options trading strategies be sure to join our free options income trading newsletter by clicking here

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Creating Weekly Options Windfall Profits

Creating Weekly Options Windfall Profits with an Earnings Calendar Spread Play…

 

Here’s a great little weekly options trade that was passed around our trading group recently. Actually this options trading set up can be played on stocks with both (or either) weekly option or the traditional monthly options.

One thing to keep in mind is that this option strategy play should be considered more of a ‘spec’ earnings type of option trade than a monthly option income trade – however it could become a strategy that could be played repeatedly with good success once one has traded it enough times and gets the ‘hang of it’.

Here’s how it works –

First we want to find a stock that has an earnings announcement coming up soon – and if we wish to play this strategy with weekly options we would need to make sure we find stocks with weekly options. Second, and we want this earnings announcement to occur AFTER the front month/weekly (or the ‘current month/weekly’) expiration.

So, for example, if it is January, and there is still a week or two until the January expiration day, we want to find a stock that has an earnings announcement that occurs AFTER that January expiration date. A week or so after the front month expiration date is ideal.

So again, what we are looking for in this options trading strategy is around a week or so of time before the front month expiration date – on a stock that has an earnings announcement just AFTER that front month expiration date (we will show an example of this below).

Then, once we find this type of a set up, we will be looking to put on a calendar spread either at the money – or very close to at the money – where the underlying stock is currently trading at.

Here is the thought behind this trade:

Typically what happens with options is that when there is an earnings announcement – or some type of ‘news event’ with the underlying stock – the volatility levels in the trade rise up and stay up until the ‘event’ passes (either the earnings announcement or the news event). It’s not uncommon to see the volatility level stay at higher levels until the moment the earnings announcement is released – and then, immediately – the volatility levels drop back to a lower, more ‘normal’ level – sometimes within seconds.

So, with our above set up, we are looking to place a calendar trade on an stock where we are buying an option in the ‘next month’ – the month where the earnings announcement ‘event’ is going to occur – which means that the volatility levels should remain high at least until the earnings announcement event takes place. The value in those options will stay raised up – and perhaps even continue to rise – even maybe increasing in value – up to the date that the earnings are released.

On the other side of the trade we are looking to SELL an option (at the same strike price – creating a calendar spread) using options in the front month. Options which will expire BEFORE the earnings announcement. There is much less ‘uncertainty’ with these options as the earnings announcement will really in no way effect them due to the fact that they will be expiring before the earnings announcement is released.

In other words, the options that we will be selling will decay at more of a normal rate – while the options that we will be buying behind it will very likely hold their value and not be effected as much – at least until the earnings announcement takes place. In fact, it’s very possible that these options that we will be buying could actually INCREASE in value due to the volatility and the uncertainty from the upcoming earnings announcement – while our sold ‘front month’ options are decaying and putting money in our pocket at a normal rate.

The difference in this scenario – or the ‘spread’ – is our profit. And with this type of a set up it can be significant – creating a real monthly – or weekly options windfall profit – and much more ‘boosted’ gains than just normal type of calendar spread play.

To learn more about our unique option income strategies be sure to join our free option income newsletter by clicking here

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Expiration Day Strategies

Someone sent me an interesting video yesterday regarding a weekly options trading strategy called a strike force – or strike force trade – which is a variation on a ratio spread trade that can be used at or near options expiration using weekly options. Coming up we’ll get more into this type of trade and exactly how it works (or just join our free options income trading members site by CLICKING HERE ) – and we’ll also get into how to correctly place and manage these types of trades along with other easy to implement ‘expiration day type’ plays such as calendar spreads, broken wing butterflies, 1 day iron condors, iron butterflies, straddles, pinning and more. To learn more join our free options income trading newsletter / members site by CLICKING HERE

weekly options

Weekly Options Strategy

Even though the name of this weekly options strategy might cause one to think of this trade as a ‘bullish only’ position – a bull spread options trade can actually be used if you think the market is going to be heading up or going down – or even if you feel the options trading market will won’t be moving much at all.

Options Trading Strategy with Defined Risk

What is nice about this trading strategy is that it is a defined risk trade – which means that you can manage your position – control your risk – without having to set up stop orders that are contingent on if and where the underlying hits a certain price (or position loss) point – or – without having to sit in front of your computer screen all day watching every tick of the market in order to make a stop loss exit on this option spread position manually.

This is because one of the options in this position cuts the trade off at whatever option strike it is placed at.

Trading Example

For example – here is a bull call spread on XYZ which is trading at 67.50:

Buy 1 65 call strike
Sell 1 70 call strike

If the market drops below the 65 call strike price while this weekly options position is on, the trader can only lose a limited amount – which is the amount that has been ‘capped’ by the long 65 call.

What helps to make this attractive to weekly options traders as far as risk management goes is that many newer traders have a difficult time managing their risk in option trades. They aren’t able to properly calculate exactly where to set stops – or they aren’t able to correctly set up what can be complicated contingent order set ups. Or, they may get stopped out and become frustrated – or even worse – not even set up stops or a risk management plan at all on their option trades.

By creating an easy to implement options trade like the bull spread strategy – the traders risk management is already built into the trade so there is no additional and/or complicated steps necessary to make sure your weekly options trading losses don’t get out of control.

To learn more about these types of option spread strategies – unique ways to trade them using regular dated and weekly options – along with many other unique option income trading strategies be sure to join our free option income trading newsletter by going here

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