Playing Earnings With Weekly Options

weekly options trading

Weekly Options – Earnings

With earnings season comes some great opportunities to profit especially using weekly options.

One of the great things about the weekly options is that there is an expiration day every single Friday – four times a month (or however many Fridays there are in a month.)

Weekly Options – Cheaper Trades

The weekly options have such short time frames of life that they allow us to use them as super cheap spec plays when we think that a particular underlying is going to make a significant move.

For example, let’s say that it is a Wed. during earnings season – and there is a particular stock that is going to have an earnings announcement on Wed. – and we believe that as a result of this earnings announcement – there is going to be a huge exploding move – we can potentially afford to purchase a call or put option much more cheaply than a monthly dated option – and potentially profit from the move. In this scenario, there are only two more days of life left in this option and it can be priced much more cheaply than a longer term dated option. Or, we could purchase both a cheapĀ  call and a put at the same money – creating a straddle – and potentially profit if the stock moves either way.

Usually, when playing earnings with the longer dated options – I would want to be very vigilant of an earning type trade. For example, as soon as the earnings announcement comes out – regardless if an appropriate move occurred to make my trade profitable or not – I would most likely want to get out of the trade immediately after – either booking my gains or taking my loss.

Weekly Options – Spec Play

However, with weekly options – depending on how much exactly is at risk in the trade – I might be able to be much more lax – and if the the options are cheap enough – once again thanks to the super short time frames we are dealing with every week – it could be possible to not even needing to get out of the trade at all – since the max risk is so small – we might be in a position where we could just leave it on as a ‘lottery ticket’ – and our acceptable max risk in the trading position is just the entire cost of the put or call.

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