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Weekly Options Trading – Ahead Of Earnings…

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Here is a good article from schaeffers research on trading weekly options ahead of earnings – and the risks involved. Good graphs demonstrating their points. Weekly options – not traded correctly – is much like rolling the dice. Here is from the article, which can be found online here

Trading Weekly Options Ahead Of Earnings – Is It Worth The Risk?

If you consider the options market a casino of sorts, then weekly options ahead of earnings represent a veritable craps table at the Mirage.

For instance, on March 17, Research In Motion Limited (RIMM – 55.23) listed weekly options for expiration on Friday, March 25 — a session after the company was to report earnings. Ahead of the report, the shares of RIMM traded between $61 and $64, so the weekly March 60 puts and the weekly March 65 calls gave us a pretty nice window into the all-or-nothing bets going on ahead of earnings.

To better illustrate, below are a couple of charts showing the closing bid/ask prices on the 60-strike weekly puts and the 65-strike weekly calls for each day of the options’ short lifespan.

Click here to read the entire article and see the graphs…

This article is from schaeffers research

Weekly Options Surge in anticipation of Government Shutdown – Article

Interesting story from Bloomberg on how the Looming Federal Shutdown is seen as causing a surge in the S and P Weekly Options. The premise is that the sudden surge in the trading of these weekly options is being caused in part by the looming government shutdown. This is from the article

S&P 500 Weekly Options Trading Surges As Federal Shutdown Looms

April 8 (Bloomberg) — Trading of weekly put options to sell a Standard & Poor’s 500 Index exchange-traded fund surged as a shutdown of the U.S. government loomed.

More than 112,000 of the SPDR S&P 500 ETF $133 puts, which expire when U.S. exchanges close today, changed hands as of 2:59 p.m. in New York as the fund slumped 0.7 percent to $132.39. Trading volume was more than double open interest, or the existing number of contracts yesterday.

“Investors might be taking positions in anticipation of equity market weakness this afternoon on concerns about a looming government shutdown,” Frederic Ruffy, a senior options strategist at WhatsTrading.com, a New York-based provider of options-market analytics, wrote in a report.

Democratic and Republican leaders in Congress remain divided over a federal budget, hours away from the first U.S. government shutdown in more than 15 years. Democratic leaders say Republicans are refusing to accept federal funding for Planned Parenthood. Republicans say the dividing issue is the amount of spending cuts.

Here is the link to the original story – go here

New Weekly Options Report – Weekly Options

New Weeklys Options Report for 04/07/11 from the CBOE by Angela Miles.

This new weekly options video report from Angela Miles at the CBOW discusses current and recent activity in weeklys expiring for 04/08/11.

This video discusses weekly options trading content regarding Google, Cisco, Netflix, Apple, SPDR Gold Trust (GLD) & there is also a viewer email question answered.

Check it out at:


Also remember – the new weekly options for next week expiry come out today. You should be able to find a list of the new weekly at CBOE.com

Weekly Options – Iron Condor

The weekly options iron condor is one of the most popular option strategies available to traders. Unfortunately, it is also possibly the most dangerous.

The thing is, when rookie option traders first hear of this strategy (perhaps from a late night infomercial or free hotel seminar conducted by slick salesmen touting it as the greatest thing since sliced bread) – very few seem to able to resist the temptation to jump right into trading them head first – with actual real hard earned money on the line – and usually way too much of it.

And unfortunately what always seems to happen to a high percentage of them is that they promptly wind up getting their trading accounts demolished and their heads handed to them on a platter.

Now stop – wait – hold on just a second.

Before you start to get the wrong impression, please, let me clarify something here.

I absolutely LOVE iron condors. ALOT. In fact, the iron condor is right up there as one of my favorite trading strategies.

And I think it REALLY IS a good solid trade.

And those claims and stories of ten percent monthly gains and ninety percent probabilities? They are absolutely true.

Here is the problem: All those fresh, green and excited new option traders have no idea what they don’t know. This trading options for income thing is like an alien planet – with a whole new set of rules inside a brand new reality. And when the person who has introduced them to this new way of trading just tells them about the good but forgets to tell them about the bad – they wind up jumping in with way too much confidence, misunderstanding, and expectations that are completely wrong.

See what isn’t being talked about with iron condors is that while yes, they can provide great monthly returns and high probabilities of winning- they also come attached with a horrendous risk to reward ratio – sometimes as poor as 10 to 1!

This means that in order to achieve those 80 to 90 percent probability trades – you need to risk ten dollars to make just one – or to be more realistic – you need to put at risk $10,000.00 for the chance to make just $1,000.00.

And as my mammy used to say (God bless her soul) – that risk to reward ratio is ‘an awful bad egg’. In fact, it’s an honest to goodness stinking rotten deal.

Because once you do the math you find that even with those glorious monthly returns with 80 to 90 percent probability of winning – all it takes is just one problem month to come along and cause a loss that will completely obliterate the 8 to 9 wins you’ve managed to rack up – as well as potentially the rest of your entire account!


All is not lost…

As I mentioned earlier – I really do LOVE trading weekly options iron condors.

Over the last ten years it’s been extremely profitable for me.

So obviously there’s a way around that horrible risk to reward issue and the inevitable problematic losing months.

And there is.

It’s all in how you manage the trade.

That risk to reward problem quickly becomes a complete non issue as soon as you educate yourself on the proper way to initially set these trades up and how to correctly manage and adjust them.

You just need to take the time BEFORE jumping into trading the weekly options iron condor pool to equip yourself with this little bit of knowledge. A few simple ‘tricks of the trade’ – so when those problem months DO come along (and they WILL believe me) – you will know exactly what you need to do to immediately squash that threat, easily adjust yourself out of the problem, and experience the iron condor for all it’s ‘really’ cracked up to be.

Weekly Options – Learn To Trade Weekly Options

Weekly Options – Kickin’ It With The Butterfly Spread

A excellent trading strategy for market players of Weekly Options who feel the underlying vehicle they’re working with will probably be range bound for the next two, 3, or four days of time or so is the butterfly spread .

This method is a plus theta position as it creates profits from the passage of time as the weekly options that are sold in the position decay over time. As long as the underlying vehicle doesn’t move too far in either direction or just as long as the price of the underlying index ends up at or near the sold strikes of the option position on expiration day, this position will be profitable.

Here is an representation of a weekly options butterfly spread position:

Buy 5 contracts of QQQQ forty four put. Sell 10 contracts of QQQQ 46 put. Buy 5 contracts of QQQQ 48 put.

These trades can render instant profits for the option trader as a result of the short strikes in the position (the strikes that have been sold) providing so much premium into the investor trading account. This is because the strikes that are usually sold in these option positions are the ‘at the money’ strikes – or the strikes that dwell closest to where the underlying is actually trading at when the spread trade position is first put on. Strikes that rest ‘at the money’ typically contain the most amount of time premium in them.

Whilst you will encounter a number of mutations of the butterfly method, the two most repeated are the standard butterfly option spread trade which is set on for a debit, as well as the iron butterfly, which is put on for a credit. While these are two different versions of the butterfly spread, if you were to compare at the risk graphs of each they look identical and or the most part they act act indistinguishable as well. With both variations of this strategy, it is the sold strikes that create positive returns to the trader as those short options disintegrate in value over time.

The weekly options butterfly technique is a ‘delta neutral’ strategy, meaning that market players who employ this strategy either don’t have an judgement on marketplace direction or trust that the underlying being played will remain in its ordinary space on the price chart for the continuance of the trade.

When played in the approved manner, Weekly Options can be an enormously profit making, low tensity, and fairly nice trade that requires very little time and effort having to run.

Weekly Options – Gamma Scalping

A great way for option traders to generate consistent income in extremely volatile markets is called Gamma Scalping . When the market / underlying instrument is making huge moves and swinging around wildly, this is a strategy that thrives – unlike the traditional monthly income strategies such as iron condors, calendars, credit spreads, etc.

This strategy is initially set up to profit no matter what the market winds up doing. If the stock or index being used immediately goes up or down using either weekly options or the traditional monthly options, a gain can be realized either way. Then, using the gamma scalping adjustment technique, the trader can lock in those gains, capturing the profit, and then immediately ‘re set’ the trade to once again make a profit no matter what the stock or index being used winds up doing.

When gamma scalping using weekly options – the trader doesn’t care which way the market will be heading. The trade is set up to profit either way. Up or down – its all good. And the bigger the moves, the better.

This option trading method allows the trader to continually grab – or ‘scalp’ – profits from the same trade position. Once a profit is realized from a move either up or down, the trader locks in that gain using a super easy to implement adjustment method that not only captures that profit – but also re-sets the position to once again profit either way the underlying winds up going. And this can be done, over and over again on the same position.

One of the most frustrating things to directional traders is when a trade actually goes in their direction, making them profit, only to immediately revers and go the other way, wiping out their gains, and perhaps even then dipping lower putting them into losses. Gamma Scalping is a strategy that can erase that frustration because it immediately locks in those realized gains while repositioning itself to once again be profitable if the underlying instrument moves either way.

If you are using weekly options or regular options, trading this way takes so much stress out of trading – and actually makes it quite enjoyable. Gamma scalping allows one to not have to be right about direction and still have the ability to be very profitable. Wether the market heads up or falls down – we don’t care. Either way we can make money.

During wild crazy times, especially like the extremely volatile markets we are currently experiencing in the markets, Gamma Scalping should be considered a ‘must have’ method for option traders to learn how to use correctly.

And along with being a stress free and potentially very profitable way to trade – it’s actually a whole lot of fun too.

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Weekly Options Videos

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