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.
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