5 Tips for Buying Weekly Options
Weekly options are now available on a wide variety of popular stocks, which means that every week is now an expiration week. As a result, it's possible to be stingy about how much time value you're buying, since you can fine-tune the time frame of your trades to line up almost exactly with your forecast for the stock's expected move. To make the most of your weekly option trades, keep reading for our best tips.
1. Buyers should avoid sluggish stocks. By definition, a weekly option is a short-term play. (As the name implies, "weekly" options are those that expire on Fridays outside of the traditional monthly expiration weeks.) Since the underlying stock doesn't have much time to make a favorable move in your direction, it pays to buy weekly calls and puts on names that have a history of big, dramatic price swings. In other words, this isn't the format to initiate a conservative bullish play on a slowly trending blue chip -- you want a fast, aggressive move in the right direction.
That said, weekly options aren't just for buyers. Slowly trending or range-bound stocks might actually be ideal candidates for those looking to sell (to open) weekly calls and puts, so it pays to keep an open mind.
2. Wait for the right setup. Weekly options offer plenty of advantages, but they aren't necessarily all-purpose trading vehicles. This is especially true now that many exchanges offer up to five consecutive series of weekly options at a time -- which means it's possible to buy a weekly option with more embedded time value than its traditional monthly counterpart.
Before initiating a weekly option play, be sure it's the right tool for the job. If you're predicting a gradual uptrend -- the kind that may include the occasional pullback or period of consolidation -- you'd likely be better served by purchasing at least a few months' worth of time value for the trade to develop. On the other hand, if you expect a drastic spike higher over the span of just a few days, that's exactly the type of scenario for which weekly options were made.
3. Look for a catalyst. Along the same lines, there are a few indicators that might help to signal a big impending move. For example, upcoming events -- such as a product launch or quarterly earnings report -- have been known to trigger eye-catching price action in the underlying shares.
On the charts, keep an eye out for historically volatile stocks that have recently endured a period of conspicuous consolidation, since this could indicate that another explosive move is due in the near future. Tightly pinched Bollinger Bands and the symmetrical triangle pattern are two technical indicators that can offer valuable clues on this front.
Meanwhile, from a sentiment perspective, it's always encouraging to see a healthy supply of short interest. Short-squeeze rallies can result in major upside moves in a very brief period of time, presenting an ideal setup for the weekly option trader.
4. Focus on liquid names with narrow bid/ask spreads. This is an easy rule to follow for weekly option traders, since these short-term contracts are generally listed only on stocks that have already attracted a wide following among traders. When a stock's options generate a respectably heavy amount of volume each day, the bid/ask spreads tend to be narrow -- that is, there's not that great a difference between the lowest price a seller is willing to accept for a security and the highest price a buyer is willing to pay.
There are two major benefits to trading liquid options with narrow bid/ask spreads. First, it helps to ensure your ease of entry and exit on the position, since there's a healthy built-in demand for the contracts. Second, you've effectively reduced the ill effects of "slippage" -- which simply refers to the fact that traders buy at the ask price and sell at the (lower) bid price. The smaller the difference between the bid and ask prices at the outset of the trade, the less you'll have to worry about slippage impacting your profits.
5. Take advantage of affordable hedging opportunities. Since weekly options carry less time value than their monthly counterparts, they offer an economical way to hedge your stock positions against event-related risk using the "protective put" strategy. If you're holding shares of a company that's due to report quarterly earnings at the beginning of the month, buying the corresponding weekly put option will almost surely be cheaper than shelling out for the extra few weeks of time value baked into the cost of a front-month put.
Of course, since scheduled events can push implied volatility higher across the board, it always makes sense to compare volatility levels before committing to any option-buying strategy. All other things being equal, though, a shorter-term option will generally be cheaper than longer-term alternatives. And when you're buying put options to hedge -- which means you're generally hoping the contracts expire worthless -- it makes sense to minimize the amount of capital you're committing to the trade.
Taking Advantage of Convexity
One of the benefits of buying options is convexity. When a stock drops one point, a call option with an initial delta of 50% will lose a half-point. But the call option will now have a lower delta, which means the next one-point drop in the stock will result in a correspondingly smaller loss for the option.
This "positive curvature" reduces an option holder's price risk on each successive decline in the underlying shares. By contrast, a stockholder would continue to lose the same one point on each successive drop in the stock.
Convexity works in the same beneficial manner as the stock moves higher. A call option's delta will increase on each successive rise in the shares, which means the call holder enjoys increasingly larger gains as the trend higher continues.
Since weekly options have relatively little embedded time value, they're a great vehicle for taking full advantage of convexity. If the stock's price changes dramatically in your favor within the time frame of your trade, you stand to benefit greatly from the directional move, while losing very little of your option's worth to time decay.
Putting It Into Action With
Schaeffer's Weekly Options Trader
If you want to get in, get out and lock in your profits fast, weekly options were made for you. You'll get flexibility and limited market exposure, so you can target huge winners, no matter what the market does.
Weekly options allow you to target short-term moves in a stock without paying high time premiums. You pay only for the time you need to capitalize on a short-term move! That means you can allocate your leftover trading capital to other trades.
And since these trades target such specific moves, you can limit your exposure in the market to just a few days at a time--a good thing in any market.
Since weekly options have a shorter time frame, you’ll also recognize your profits a lot sooner. That’s quicker money in your pocket! And who couldn’t use that?
Target Bigger Profits in Shorter Time Periods with Weekly Options
With weekly options, you’ll be in and out of most trades in seven trading days or less, just like my Weekly Options Trader subscribers were with our 150% win on Valero Energy Corporation calls.
If you had bought just 4 contracts for $900, you could have made $2,250. That's $1,350 in extra cash - in just 7 trading days!
Our subscribers have seen gains like:
- +122% GAINS on Tesla Motors
- +80% GAINS on IBM
- +97% GAINS on LinkedIn Corporation
- +85% GAINS on iShares Barclays 20+ Year Treasury Bond Fund
- +88% GAINS on KB Home
- +150% GAINS on Valero Energy Corporation
Just look at what you get with your Weekly Options Trader subscription:
- At least 6 trades targeting 100% or more gains per month - Our traders constantly search for new trades with big profit potential. These recommendations are delivered to you during market hours as soon as they become available.
- Simple Option Strategies - Each trade is a simple call or put purchase. No margin requirements. Simple, straightforward option trading delivered to your inbox.
- Fast profits targeted to 100% gains in 7 trading days or less - Take your gains quickly and prepare for the next trade. Exposure to the market is limited.
- Flexibility to let the winners run - Profitable trades don’t have to be cut short. If the option remains profitable, we send you specific directions on how to “roll it” into the next expiration week, or longer if needed.
- Detailed analysis for each trade - See exactly why the trade was chosen and the projected forecast. Learn which indicators and chart patterns revealed the entry and exit. Use that knowledge to create similar trades.
- Specific instructions on how to enter and exit every trade - Always know how to execute and exit trades. If option trading is new to you, you can give these directions directly to your broker who can place the orders for you.
- Free Weekly Options Trader Handbook - Your resource for the service as well as specific money management techniques. Everything you need to do to manage and protect your trading capital.
With your Weekly Options Trader subscription, you'll see how easy it is to trade weekly expiration options.
Each of your 6 monthly recommendations will include easy-to-understand commentary about the trade, so you can see why the trade was chosen, and specific instructions on how to make each trade. We'll also send you an email when it's time to exit the trade, so you always know exactly what to do.
Each trade will target potential gains of 100% in seven trading days or less. If there's an opportunity to make more money, we might recommend letting your profits run an extra week or two, but no longer. Remember - this is all about getting in and out of the market quickly.
Become a Weekly Options Trader Today and Save 34%!
Being successful in weekly options trading requires more research and analysis since your timing has to be just right – but there is no need for you to spend your invaluable spare time pouring over numbers and charts – our experts are here to do the work for you!
We’re constantly analyzing the market, looking for the indicators and chart patterns that signal that it’s a good time to enter and exit trades – then we email that information straight to your inbox.
We give you everything you need. Simply set up the trade in your online trading account...or read it directly to your broker over the phone.
It's that EASY! You don’t have to navigate the market alone!
There’s no long-term commitment since you pay as you go. With this offer you’ll secure the discounted rate of just $99 per month, and your rate will never go up! If you're not thrilled with Weekly Options Trader at any time, you just give us a call or send us a quick email and let us know. You won’t be billed for any future payments, no questions asked.
Start targeting huge gains in seven trading days or less. Our next trade could come out at any time!
Join Weekly Options Trader Today !