Options trading is a form of stock trading where the trader has buying or selling the stocks’ rights at a specific rate before the due date.
Weekly options trading is a form of options trading that is more successful. This article will let you know about the ways weekly trading will benefit you.
Options trading is a contract based stock trade. The idea is that you can get the right to buying or selling a stock, but you are not obligated to buy or sell.
There will be an expiration date until you can enjoy these rights. The expiration period is divided into monthly and weekly sections. The expiration period differentiates the weekly and monthly options trading.
Consider the 11 tips below when trading with weekly options-
- 1. Put Your Small Trading Account To Better Use
- 2. Learn The Basics Of Weekly Options Trading
- 3. Utilize Trading News
- 4. Lose Less Money In Weekly Options
- 5. Trade More Actively
- 6. Increased Chances For Higher Annual Return
- 7. Less Chance Of Market Crash During Off Days
- 8. Use The Covered Call Strategy
- 9. Purchase OTMs For Speedy Profits
- 10. Read The Weekly Options Trading Calendar
- 11. Maintain Your Position
1. Put Your Small Trading Account To Better Use
Options trading is better suited for beginners who do not have a significant amount to invest in stocks. It provides a shield against the irregular fluctuation of the prices in the stock market.
The options trading is dependent on leverage, so a lot of money is not required at first. Compared to the actual stock trading, the options trading move is faster.
2. Learn The Basics Of Weekly Options Trading
The basics of weekly options trading include information regarding the time charts, expirations, trade options, profit, and recent trades loss.
Weekly options trading can only happen six days a week. The contract expires on the day the market closes every week. You cannot trade for one week per month in weekly options trading.
You can trade stocks and ETFs through weekly options. Since weekly options have a small trading time window, the recovery time for your investment will also reduce.
It is better to learn more about the basics of options and weekly options trading before you start. To learn more about weekly trading, you can follow Chuck Hughes weekly option trading strategies and tools.
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3. Utilize Trading News
Weekly options are not affected by trading news much. If a company is set to introduce new products, then its stock price may go up.
The weekly options are affected in terms of money by these. The amount of price that increases for weekly options is meager compared to longer-term stocks. So you can still buy or pay for those.
4. Lose Less Money In Weekly Options
Weekly options are dealt with a small amount of money. Monthly options or stocks require a more considerable sum of money to be invested.
The amount of money lost is also more significant in stocks or monthly options. Weekly options give you the chance to lose less money. In case there is a crash in price, you will lose money in small amounts.
5. Trade More Actively
Weekly options can be traded more often. The variety of weekly options available for trade changes every week, and CBOE or Chicago Board Options Exchange is responsible for these weekly updates.
They want to have attractive options to be dealt with in a smooth and fast process. The weekly options list can be accessed at the website of CBOE.
6. Increased Chances For Higher Annual Return
The annual returns of weekly options are higher than other options. The annualized metrics are better in this case. Since the selling returns are increased every week, you make more money in a year than stocks. You also run less risk of losing money.
7. Less Chance Of Market Crash During Off Days
The market crashes that occur during the two off days after market closure can affect many trades.
Most people do not like this probability of a market crash. With weekly options, you can avoid this unknown factor. Your trading will be done at the end of the week before closing days.
So, whatever happens during the off days will not concern your investments.
8. Use The Covered Call Strategy
The covered call strategy is a strategy to sell weekly options against existing stocks.
It also requires you to sell or purchase stocks or weekly options against buying and write stock holdings.
This strategy comes with less volatility. The covered call strategy is also better than the traditional buy and hold strategy.
You should use trading tools and simulators to find available to figure out the potential covered calls with good returns. That helps in increasing income and decreasing risk.
9. Purchase OTMs For Speedy Profits
OTMs are out of the money options. It is a strategy that is a bit on the extremes side. You have to buy a weekly share that is supposed to have a massive return in profits. You will probably end up losing small amounts of money every week for this strategy. The risks here are higher than other weekly options trades.
It is possible to earn a return big enough to make up for the losses endured before. It can be used for investing in M&As and FDA approvals of products.
10. Read The Weekly Options Trading Calendar
The calendar spread of weekly trades gives good recommendations about stocks. The calendar spreads allow you to buy weekly options with long expiration dates and sell the ones with shorter expiration dates. The faster time decay will allow for higher margins of time premium.
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11. Maintain Your Position
During downtimes of the market, the call options’ spreads can help you maintain your volatile market position. In volatile markets, it is preferable to sell options rather than buying them.
The price of your option can go up or down depending on the price of the original stock. The trade of call options, however, can reduce the price fluctuation of the stock.
Trading options is sometimes considered a safer alternative than traditional stock trading. Since you will only be investing in the option prices, the risk is also minimum.
The weekly options trading takes it one step further and speeds up the process even more. Consider the things mentioned above to trade weekly options effectively.