Weekly Options – 10 Things
What Are Weekly Options?
Weekly options are also called weeklys. These are the types of options that are listed one week before it expires. These kinds of options are different from the traditional options because traditional options have longer time before they actually expires.
Typically, the weekly options are going to be listed every Thursday. The expiration date for the weeklys will be on the Friday of the following week. However, there will be no weeklys that is going to be listed during the week when the expiration of the standard options is going to be due. This happens every third Friday of the month.
Generally, weekly options have the same contract specifications as well as the same two sided quotes that are continuous in nature like the standard options. Not just that, weeklys also has the same right and obligations like that of the standard calls and puts. The only difference that the weekly options and the standard options have is the shorter time frame for the weeklys’ expiration.
Weekly Options – A Short History
The Chicago Board Options Exchange or CBOE is the one who introduced weekly options in October of 2005. CBOE is the largest US options market. This type of options are one week options which means that they have one week before they actually expires. These weeklys are actually based on the SPX, XSP, OEX and XEO index options. These types of options are cash settled ones.
On June 04, 2010, the CBOE announced that they are going to begin trading new weekly options on four exchange traded funds or ETFs which are the Nasdaq-100 Index Tracking Stock (QQQQ), DIAMONDS Trust, Series 1 (DIA), Standard and Poor’s Depositary Receipts (SPY) and iShares Russell 2000 Index Fund (IWM). Weeklys were then used on four individual equities which are the Apple (AAPL.O), Citigroup (C.N), Bank of America (BAC.N), and U.S-listed shares of BP (BP.L) (BP.N) on June 25, 2010.
Starting July 1, 2010, CBOE introduced an all new series for weekly options. This weeklys will now start trading on Thursdays and they will expire on the Friday of the following week. They have changed the rules as previously, new series of weeklys are listed each Friday and expires the following Friday. Weekly options became available on GLD, C, BAC, AAPL, XLF, EEM, BP, F, and GOOG starting July 5, 2010.
Weekly Options – Advantages of Using Weeklys
- Shorter Duration – Weeklys actually offer better trading flexibility as well as accuracy timing from shorter durations.
- Better Access and Flexibility – With the expanded expiration choices, better access as well as flexibility are experienced.
- Precision Timing – Weekly expirations actually offer accurate and strategic tools that will definitely help traders capitalize on movements on the market which stems from new market events as well as new economic releases. Another thing to note is the fact that there is a rapid growth in terms of popularity among those who participate in the market.
- Confidence of Exercise – Just like monthly options, weekly options also offer exercise of European style. This type of options also forbids contrarian instructions. This means that when the expiration date comes, all in the money options are exercised and all out of the money options are abandoned automatically.
How to Use Weekly Options?
Weekly options are the same with standard option when it comes to strategies as they can actually be used in various strategies. The strategies that you can use with weeklys are Collars and Vertical Spreads. Covered Calls and Married Puts are strategies that you can also utilize. You can also use strategies like Condors and Butterfly positions. However, the premiums for this type of options are relatively lower compared to that of the premiums of the standard options. This is due to the fact that weekly options have shorter expiration time frame and lower time value.
Are Weekly Options For You?
Weekly options are popularly used by investors and traders who are aware of what they are doing. If you understand the pros and cons of this type of option then you know very well that this could turn to be something or nothing very quickly. If you are looking for a way to be able to focus on movements which are short term in the market then the weekly options are perfect for you.
Another thing that you need to take note regarding weekly options is that this is a powerful tool for investors and this is capable of creating quick profits as well as quick losses. The only thing that you have to keep in mind when you use weekly options is that you need to use them carefully and plan your strategies well because the outcome of this type of option will generally depend on how you actually use them.
To learn more about trading weekly options join our free trading news letter – click here