All posts by Ted Nino

The Birth Of Weekly Options

During 1973, the standard call options gain its popularity. Chicago Board Options Exchange started the standard call options. In the year 1977, the put option was established after the success of the standard call options. Put options gains it popularity as time passes by. There was a massive increase on its trading volume and it gave a remarkable annual growth rate. Basing from this big increase, it only shows that investors really understands the concept of options. The overall increase was brought about by the familiarization of the investors on using these options.

In 2005, a new class of option called Weekly Options by Chicago Board Options Exchange. Thirty two years after the first introduction of call options weekly options were introduced. The weekly options were called by investors as \”weeklys\”. Options may differ on many ways, however, \”weeklys\” and monthly options are comparable. They also have differences and one of it is the capability of weeklys to exist by eight days only. You can get weekly options on Thursdays and it automatically expire after eight days. Monthly options has twelve monthly expirations and expires every third Friday of the month. Weekly options has the benefit of fifty-two expirations on a yearly basis and any investors of it will surely enjoy it.

Calendar Spread: Whatever Goes Down Must Go Up

Even though the Calendar Spread may be used in numerous stock market environments, they operate the best in low volatility climates. While soaring volatility levels are wonderful for these trades, sinking volatility levels bring them a lot of pain.

Because calendar spreads generate profits the fastest at neutral to rising volatility levels, many calendar spread traders will wait until an underlyings volatility levels are either at the lowest level of their average range or at least until they are in the lower end of their average volatility levels before placing a trade.

By waiting until these levels are reached, the calendar spread trader is hoping to increase the odds that the volatility levels will either remain where they are and not sink down further (which could wind up hurting the trade), or that they will start to rise back up (which would put their position into good gains quickly).

Normally volatility levels sink as the market moves upward and rise as the market moves down. This is why many option traders will place calendar spreads when they have a bearish view on the market.

Playing Weekly Options – Kicking It With The Butterfly Spread Trade To Bring In Weekly Options Money

A nifty method for Option Volatility investors who assume that the underlying instrument they are working with will be range bound for the next 2 to 4 days or so of time is the option butterfly strategy.

This theta positive option trading system generates income when the stock or index that is being traded remains within a contained region on the graph or ends up on weekly options expiration day at or near the sold strikes of this trade.

Here is a trade example of this weekly options technique:

Buy ten contracts of SPY one hundred calls. Sell twenty contracts of SPY one hundred and five calls. Buy 5 contracts of QQQQ 48 put.

These positions can yield abrupt returns for the investor as a result of the short strikes in the position (the strikes that have been sold) providing so much premium into the weekly options trader options trading account. This is because the strikes that are usually sold in these spread trades are the \’at the money\’ strikes – or the strikes that reside closest to where the underlying is actually trading at when the trading position is first put on. Again, these options that are picked exactly where the underlying trading vehicle is traded at usually award the largest amount of option premium useable.

Iron Condor – Novice Traders Beware

The iron condor is becoming a favorite trade of option traders – however it is fairly important not to forget that with all trades there are risks – and here we will go over the pros and cons associated with this trade. While this strategy can produce impressive, passive results, it’s important not to forget that along with this trade come some potential pitfalls that every trader should get to know and understand.

Even though the iron condor might sound like a complicated strategy – it is actually quite basic and simple.The iron condor is just two separate spread trades – a bull put spread placed below where the underlying is currently trading at – and a bear call spread placed above.

The simplicity of this trade might be a bit misleading to the newer option trader due to the fact that the probability of the trade is so far skewed in the favor of the trader – it is easy to overlook the potential risks that are involved.