7 Benefits of Weekly Options

by Tom Nunamaker on August 11, 2010

Weekly Options are relatively new but are catching on quickly. Traders in our community are testing the waters with them more and more.  The CBOE has a page dedicated to weekly options at http://www.cboe.com/weeklys

Here’s a list of seven benefits of weekly options:

1. High Frequency – Learn Faster

Every week is a new trade.    You have more opportunities to perfect your trading skills in a given time period.

2. High Frequency – Over Come Losses Faster

If you trade monthly options, you have 12 trades per year. With weekly options, you can have 52 trades per year.  This gives you more time to average out your trades and hopefully have a smoother equity curve.

3. High Frequency – Higher Annual Returns

Because you have over four times the number of trades in a year, if you can average even 1/3rd of your monthly yield per week, you should be able to have a higher annual return.

4. High Theta (this is a benefit for non-directional traders)

You can get in and out much faster.  Some of our students are in the market one or two days per week due to the high theta

5. High Gamma (this is a benefit for directional traders)

This is a benefit to directional traders. Weekly options should be very attractive to gamma scalpers

6. Less Market Exposure

If you are in and out of your trade in a few days per week, then there are several days per week you are out of the market (flat).  This reduction to market moving events is great!  Since the weekend theta decay is normally priced out of options by Friday, most weekly option traders enter on Monday to Wednesday.  Trading this way completely eliminates weekend risks which are 2/7ths of the entire year!

7. New Hedging Opportunities For Longer Term Positions

If you have a short term directional opinion, you can use weekly options in combination with monthly options or your underlying positions to protect yourself.  A good example is yesterday’s FOMC announcement.  You could have used the weekly options to hedge off risk until after the announcement was over and it was clear which waythe market was reacting to the news

Dan did a recent webinar on this subject.

Overall, weekly options provide some exciting new possibilities for option traders.  I’ll present another list tomorrow of the Dangers of Weekly options to compliment this list.  I’d love to hear if you can think of any other benefits to weekly options!  Leave a comment below with your additions to this list.

Picture of the Day

A fellow student and I share a love of the T-38.  Ed sent me a FANTASTIC book all about the T-38.  What a wonderful gift!  Thank you so much Ed!!  In my previous life, I was a T-38A Instructor Pilot at Vance Air Force Base, Oklahoma. It was a few years ago but the T-38A Talon is still my favorite aircraft to fly. It felt like sitting on the end of a telephone pole, going 500+knots! The fastest I had one was Mach 1.35. That’s MOVING!

The T-38 is a fantastic aircraft in formation. Very nimble with a 720 degree per second roll rate! Ahh.. the good old days! Enjoy the picture!

T-38A Talons from Columbus Air Force Base

T-38A Talons from Columbus Air Force Base

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{ 2 comments… read them below or add one }

Praveen August 11, 2010 at 12:41 pm

Do you have any setups that either you have back tested or live tested that can give high probability of success with weekly options.
Can you please post a link for the Webinar that Dan did on weekly options. I just see the link for downloading presentation but not a link to the actual webinar (video).


Tom Nunamaker August 11, 2010 at 1:03 pm

Hi Praveen,

The WebEx file is on our public event archive page here: http://www.sheridanmentoring.com/index/method/c.events.html

I think in that webinar Dan had a student on who went over his setups. He’s trying to get just a few percentage points and takes very high probability trades. Like 90%-95% probability of winning if I remember correctly.

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