When options were introduced around 35 years ago (calls and puts), they ushered in a brand-new era of … well … options!
Individual investors could now protect their entire portfolios from a market crash. They could also use options to generate extra income, and design option strategies to take advantage of both volatile and non-volatile times in the market.
Throughout the years, the number of stocks and other financial instruments with options available to trade has grown and grown. Options trading volume has skyrocketed as well, with individual investors increasingly becoming attracted to this liquid and lucrative marketplace.
Many people are attracted to the fast potential returns that options offer. And now, there’s another way to use options to make even-quicker gains.
Approximately 18 months ago, a new kind of option arrived on the scene that gives us yet another way to make money with options. That was when weekly expiring options were created for the first time on a select number of stocks, Exchange-Traded Funds and market indices, in addition to the standard monthly options you may be familiar with already.
Weekly options, or “weeklies,” have created opportunities that have never existed before to profit on some of the market’s hottest names — Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Baidu (NASDAQ:BIDU), etc. — and also to profit because of the volatile nature of today’s stock market.
Over the next few weeks, I’ll be sharing with you some compelling, straightforward insights and from-the-trenches experience when it comes to making money in the new world of weekly expiring options. In the meantime, let’s take a look at how weekly options work, and why it may make sense for you to add these incredible instruments to your trading routine. I’ll also show you a trade you can make right now to take advantage of them!
A Smaller Window of Time Can Lead to Bigger Overall Returns
One of the most compelling aspects of weekly options is how they’re priced. When you take a single week’s option premium and multiply it by four (to equal one month), you’ll notice it equals roughly DOUBLE what the one-month premium is trading for.
From an option seller’s point of view, you quickly see how darn cool this is. (In an upcoming post, I’ll talk about making money “8 Days a Week” and why, like the Beatles song, you’ll have “nothing but love” for it. Stay tuned!)
One of the most profitable ways I like to trade weekly options is with what I call a “mini calendar.” Here’s how it works.