Powerful Weekly Options – Part I

Weekly options are truly lovely if you are a chart reader. The greatest advantage is the short time frame, which is beneficial to sellers because you are at risk for a very short time. The CBOE statistics show that approximately 80% of options expire worthless. This is very advantageous to a seller, whether covered or naked.

You can trade your weekly options on Thursday or Friday, and get two free days of time decay if you are a seller. Thus you are at risk for only six or five days, respectively. Most chart readers who took the Law of Charts Flash Cards online class can pretty much figure out where the market is not likely to be 5 days from now.

Powerful Weekly Options in my Watch List

Facebook is in my Stock Options Watch List because it’s a very liquid symbol, with multiple weekly options. Below is the chart sent by one of our students: he spotted the congestion area formed by the Measuring Bar (MB) and the following four bars that had their Closes or Opens within the confines of the MB.

Powerful Weekly Options - Options Trading Education

He then could anticipate quite confidently that prices will stay within consolidation in the very near future. On the fourth day after the MB, Wednesday Feb 26th (when the congestion was confirmed), he sold the FB 70Calls expiring in just two days for $58 each.

On the very same day, I happened to sell the FB 70Calls expiring in nine days for $140 each. We will discuss in the next Option Scan editions how we choose these options. My student got his money quicker, which was very good for his mental outlook. He had to keep his options for only two days, until they expired worthless. I planned to stay in the trade longer, but I could also buy them back at any time.

Powerful Weekly Options - Options Trading Education

There are few weekly options that can return 1-2% on the premium sold for the amount of margin (or stock if covered) per week. That’s 50-100% per year return. If you used normal options instead, and had twice that amount return on a per month basis, it would add up to only 25-50% per year.

Powerful Weekly Options provide a better utilization of capital, but you need to know which ones to use. Some are very good, and others are losers from the start.