Weekly Options Strategies

Weekly options strategies are essentially the same as those used on monthly options but with the rapid time decay on weekly options, higher returns can be obtained if used correctly. The most popular methods are those that involve selling options to collect the premiums. Lets discuss some of the popular strategies below.

Put Credit Spreads / Call Credit Spreads

Credit spreads with puts or calls are a popular options strategy that allows you to short one option  and buy a further out of the money options in the same expiration period. The short options is closer to the money(existing stock price) than the long options so you collect more premium on the short option than the you pay for the long option. This difference generates a credit in your account.

If the stock expires without moving past your short option strike price then you let the spread expire and keep the premium. You want rapid time decay on credit spreads and a short expiration period so that the stock has less time to move past your short strike. Weekly options  allow for this rapid time decay. Credit spreads also involve a more advanced strategy called an Iron Condor which combines a credit put spread and a credit call spread (not advised to use this strategy in low volatility markets).

Covered Call Writing

Covered calls is a popular options strategy where you own shares in a stock and sell calls against those shares to collect the option premium from those sold calls. If the stock closes below the strike price on your short call then those calls expire worthless. You can sell(“write”) new calls each month to generate an income on that stock.

The disadvantage is that selling calls on your long stock limits the upside to your stock if the stock rises above the strike price of your calls. Therefore, weekly options allow you the fast time decay that you want with covered call writing and allows you the flexibility to sell new calls every week and also to adjust strike prices on the calls each week if the stock moves.

Calendar Spreads

Calendar Spread (also known as horizontal spreads) is when you buy a call(or put) that expires in a farther out month and sell a weekly call(or put) at the same strike as your farther out long call(put) but in a near month. You can keep selling a new weekly call(put) each week and the premiums collected each week can be used to pay you’re your long call(put) in the out month. For example if you if you like a stock that you think will move up over time you could buy far out call that expires in 6 months and sell near term weekly call against that long call every week to collect premium.

A common strategy with weekly calendar spreads is to adjust the strike price of the short call each week as new weekly options come out depending on where the stock is. If the stock hasn’t moved then you can keep selling the same call at the same strike price. Although is the stock moves around you adjust your position each week by creating a “diagonal spread” if your your short call strike price is different than your long call strike price.

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