A great weekly options trade for generating consistent income is a trade I like to call the money sandwich – or the weekly sandwich trade.
This is a trade that takes advantage of the pinning type effects that happen to a lot of the higher volume stocks that have weekly options to trade – and the set up – although it doesn’t happen every expiration week – happens regularly enough that as long as you have a stable of stocks (that have weekly options available) that you are watching regularly – it should be no problem to find appropriate candidates every week.
Weekly Options – Sandwich Trade
In less volatile times stocks would many times pin to the strike that it was closest to – and which had the most open interest / volume the Thursday before expiration day. In more volatile times, the stock can still pin to the particular strike where it is closest to (or where the most volume / open interest can be found) – however along with the volatility it can many times swing away from that strike – either visiting – or finally winding up – at the strike price closest to that strike on either side. In other words, rather than just focusing on the one particular strike and using a trading strategy that ONLY profits if the stock does pin to that one particular strike – we need a strategy that can benefit if the stock actually DOES pin to that strike – OR – winds up pinning at the strike directly ABOVE or BELOW that strike. We need a strategy that can profit in any of the 3 scenarios.
Enter the weekly options sandwich trade.