WEEKLY OPTION OBSERVATIONS We’re having a lot of fun learning how to better play weekly options. So far, we’re doing quite a few Covered Calls and Spreads—mostly Bear Call Spreads. Here are a few of the things we’re learning.
1. If you want time to fly, it sure does with Weekly Options—especially when we do trades on Thursday and Friday. 2. These trades are really tied to the news. The stock price movement is important, and we still must look at the quality of the news, and often more importantly, the commentary surrounding the news—especially regarding earnings. 3. Not all stocks have weekly options. In fact, very few do. But still, we have to be very selective. 4. Many huge stock moves are surround earnings—moving into and out of earnings. Because we can’t control this aspect of a stocks life, we stay away. There is always a better time—so we wait. 5. Lately we’ve been doing more BECS than BUPS. These are bearish and it seems stocks fall much faster than they rise. 6. Open Interest has become our main guiding factor. Our hypothesis is that a stock price will move to the strike price where the most options expire worthless. 7. We must consider the Open Interest of both the calls and the puts. If it’s confusing, walking away may be the best alternative. 8. We’ve noticed that in this market, there are many more Calls than Puts. This speaks to the optimism prevalent today, and the fact that so many companies are making a lot of money. 9. We still need a certain level of volatility in the stock to give the options some nice premiums. On stocks under $10, even 10¢ to 20¢ up and down every few days, makes a nice difference. 10. We do Spreads, not needing a lot of movement. These are No.R.M. Trades—No Required Movement. We just need the stock to go above or below the obligation strike price—while the time expires. 11. Because there is a chance that an inexperienced broker could bring you out of a trade early, we stick with the cheaper stocks—most in the $5 to $15 range. 12. We should set alerts and sell/buy orders in case the stock moves against us. End the obligation strike price first. 13. These weekly options hang on to their premiums for a good portion of the time we have the trade in place. That is why waiting until Thursday and Friday is sometimes the best way to go. 14. We can practice trade these to build skills and confidence. 15. This is an active trading system. You can’t be on vacation with an open trade, unless you have a good broker. You must watch these carefully. Remember, we make correctable decisions, not just correct decisions. 16. When we say, “On hold, and at risk.”—You must take that statement very seriously. 17. We may be the teachers—and in this case, we’ll add the researchers—but the students (you) bring a lot to the table. We can join together for more profits.
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