Weekly options trading is fairly intuitive. The list of weekly options are listed every Thursday, and they expire the following Friday. Weekly options are available on all the usual stocks and indexes, such as the S&P 500 Index (SPX), along with the major exchange-traded funds (ETFs), such as the Financial Spider Select XLF.
Weekly options are also available on some of the most widely traded equities such as, includes Apple Inc. (Nasdaq: AAPL), Exxon Mobile Inc. (NYSE:XOM ), and JPMorgan Chase & Co. (NYSE: JPM). The list of stocks and futures that are traded regularly change. Information with regard to availability are listed on the CBOE web site.
Weekly Options Tips
- Trade weekly options when you are looking for a short term movement in a financial instrument
Trading weekly options have many benefits. The options have a shorter duration than standard options which expire every 3rd Friday of the month. Shorter dated options will cost less than longer dated options, because there is less time value which generally drives up the price of an option. You should trade weekly options when you are looking for short term movements in a market.
- Use weekly options to take advantage of volatility around an economic event or earnings release
Weekly options can be specifically valuable around economic data releases or earnings releases. Because you can keep your premium to a minimum, there’s probably no better way to maximize the power o leverage within the generic options arena.
- Trade weekly options when you need to hedge your portfolio
If you have a portfolio of stocks and options you might be able to offset some of your exposure with weekly options. You can purchase insurance or short-term protection for your stocks. The cost will be low than standard options with more than a week to expiry. Additionally, to hedge your exposure to the market you can purchase weekly puts on the major indices to offset potential losses on your portfolio.
- Generate short term income by selling covered calls
You can also sell covered calls on weekly’s. Although the income you receive will be less than a longer term option, your waiting time until expiration will be a lot shorter.
Weekly Options Specifications
The Chicago Board of Options Exchange offers three different types of weekly options, along with weekly settlement data and volume/open interest information. Some of the options they offer have morning settlements while others offer PM settlement.
Weekly options are traded using American-style exercise features, which make then exercisable at any point prior to the expiration date. On expiration, the buyer has the right but not the obligation to receive the underlying instrument.
Liquidity on weekly options is robust, with the average weekly volume for the new weekly options increasing above 300,000 contracts by November 2010.
Your weekly options Edge
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