Weekly Options Trading

Weekly Options trading has become popular as more investors and option traders realize the advantage that they offer for various trading strategies . Weeklies were introduced on select individual stocks and indexes in 2010 and as trading volume grows in them, more stocks names will be added to the list.

The key advantage of weekly options is that they provide rapid time decay and also the flexibility of being able to adjust options positions each week.

Option prices are comprised 2 things:

1. Time value (aka “Extrinsic Value”)
2. Whether or not the option is in the money or out of the money (aka “Intrinsic Value”)

Since weekly options expire each Friday, you can take advantage of this rapid time decay of weeklies by implementing popular option income methods each week instead of monthly like you would with monthly options.

For short term directional trading strategies like buying calls or puts, debit spreads,etc….you can benefit from the leverage of options without having to pay up for as much time premium that you would traditionally with monthly options.

The risk being though that if you buy a weekly with too much time or volatility premium priced in then it can decay in price quickly leaving you with a loss on the option if the stock doesn’t move fast enough in the direction that you desire that week.

Weekly options for income trading is probably a more popular strategy where you are selling options to collect the premium and benefitting from the rapid time decay of weeklies vs. monthlies.

Popular methods like covered calls, credit spreads, iron condors, etc….can really benefit with the fast time decay of weeklies where you are betting that the stock will expire out of the money from your short options.

The main advantage of having weeklies is that they add to your ability to adjust your options positions(especially for income traders) and take advantage of faster time decay than you are able to with only monthly options.

Overall, weekly options provide a great benefit by offering traders a choice to use a shorter time duration each week vs. the higher priced monthly options that price in more time value premium.

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