Weekly vs. monthly options series

Discussion in 'Options' started by Quickless, Dec 26, 2011.

  1. Options – weekly vs. monthly series

    I am one of the old ones (think Roy Hobbs) getting back into the game. Right off I noticed there are 2 series for most stocks and indexes – a weekly (expires each Friday) and a monthly (expires third Friday of the month) series.

    1. When did this start?
    2. Is it for most stocks and indexes or just a select subset?
    3. Is there any good reading that explains the history and/or details?
    4. How far out do the weekly series go? Meaning – for the monthly you can go out years. How about the weekly?
    5. Do you think there is a difference in the players in the weekly vs the monthly contracts?
    6. Any comments – effective of this change on the underlying stock price?

    Thanks in advance for your time and effort.
  2. Someone pointed me to the CBOE web site and it does have lots of detailed info on weekly.

    Only questions now would be

    1. Do you think a different set of traders use the weekly vs. the monthly?
    2. Any comments on effect of weekly series on underlying assets?

  3. spindr0


  4. bc1


    As a directional vertical credit spread trader, I like the weeklies. Particularly for my small accounts, a $2800 soon to be $5300 (after a deposit before year end) ira for my daughter and my formerly $5600 ira that is now $3600 after following Grandsupercycle's advice last Friday.

    A 2 contract trade for a $5 strike spread uses up to $1000 in buying power which limits the number of trades that can be made. With monthlies, the buying power is tied up for four or five weeks. I can basically churn my buying power and profits/losses four or five times in the same monthly period. My one account had a 65% ROI in less than 3 months until a couple trades went south last week.

    If I had a much larger portfolio available for options trading, then I could try some different weekly and monthly strategies.

    There are only a certain number of stocks and indices that allow weekly trading. I mainly trade the spx but follow a few stocks until I am confident in following their trading patterns.

    It kinda boils down to how much time you want to spend. Weeklies is time consuming and you have to watch it everyday. You can be a little more laid back with monthlies depending upon your strategies.
  5. newwurldmn


    You are trading your IRA based off of some bozo on this website?
  6. spindr0


    I gotta get into this bozo website stock tip shilling for $295 a month subscription stuff :)
  7. newwurldmn


    it seems like a good business model.
  8. bc1


    Yep, I did a couple times. Strikes one and two. I don't plan on striking out with him pitching. Had a couple trades on Thursday to either get out of with some loss or hope for a pullback/selloff on Friday. His advice led me to go for the pullback instead of cutting my losses.

    I started that ira at the bank brokerage company and put it into a mutual fund back in the 90's with $3500 cash. In late September when I rolled it into my bxchicago/optionsxpress account, I ended up with $3241.17. Go figure. Lost $259 in 16 years. I hope to do better than that. I still have a quarter mil in a 401K but can't trade options with it. Have it sitting on the sidelines since September in cash and bond equivalent type funds until the green light for a bull market appears. Then I'll probably be spending most of my time chasing stock trades.
  9. I had a look at SPX weeklies and decided the weekly series, at least for SPX, did not seem appropriate for my uses. As a premium seller, it seemed to me that the IV of both puts and calls was far too low for the risk I'd be assuming.

    For example, when SPX volatility was especially high in October, weekly 10 delta calls were still sitting about 60 points out of the money. I don't keep detailed track of price spikes of the S&P by standard deviations, but there had been nine 50+ point daily moves between 8/1 and 10/31. While these calls may have been priced with an implied volatility of 40%, a cursory glance at the recent behavior of the index showed that these options were massively undervalued. Anyone selling premium on those weeklies was being grossly undercompensated for the risk; of course, anyone long options, when looking at recent 2+ standard deviation spikes occurring regularly and long gamma, was getting a heck of a good deal.

    I haven't looked at the weeklies in a while, but I'd be interested in how they're stacking up now. I'd love to be able to move in and out of trades more quickly, but as they've stood, they're too much risk for sellers. You can quickly find yourself short too much gamma, close to expiration, on a underlying price spike that was theoretically improbable (but had happened regularly anyway!).
  10. spin, are you using calls or puts? i have doing put diagonals...

    ""Shorter time horizon traders likely to go with weeklies. I like 'em for 1-2, 1-3, 1-4 week diagonals.""
    #10     Dec 27, 2011