Wondering what the weekly options are and why it is touted as a great strategy to make quick gains? If you are a trader in the US market and wondering how to make profits using powerful strategies, then you are at the right place!
Through this blog we will try to explain to you the tips and techniques for effective weekly options trading and also the associated risks.
What are Weekly Options?
Weekly options are short-term contracts that expire every Friday. The expiry may be on a different day depending on the ETF or the indexes. These contracts are perfect for the traders looking to capitalize on fast price movements and make quick profits. This strategy involves high liquidity and minimal cost, and is most favored by day traders and swing traders.
Let us try and understand why and how to trade weekly options.
Why Trade Weekly Options?
Below-mentioned are some of the benefits weekly options have to offer:
- Lower Premiums: Weekly options are cheaper to buy than monthly options.
- Rapid Returns: Can provide gains in days, not weeks.
- Greater Flexibility: Best suited for reacting immediately to news, earnings, and volatility.
- Scalability: Beginners can start small, while experienced traders can scale up.
Best Weekly Options Strategies for Quick Profits
Some of the best weekly options strategies that you can utilize include:
A. Buying Weekly Calls or Puts
- This is an easy but effective weekly options strategy for bullish or bearish trends.
- Purchase calls if you anticipate the price to increase and purchase puts if you anticipate it to fall.
- Note that this is a directional strategy and best suited for volatile markets.
1. Selling Covered Calls - Sell weekly call options on stocks that you already own.
- This will give you weekly returns in a stable way while you hold your stock positions.
- It is best for conservative traders seeking stable returns.
2. Credit Spreads
- This strategy is for bull put or bear call spreads and requires selling one option and buying another to cordon off risks.
- This strategy will help in earning quick returns while managing potential losses.
- It is ideal for traders who are looking for a defined risk-reward setup.
3. Iron Condor Strategy
- This is a strategy for mature traders and involves credit spreads on both sides when you anticipate little price movement.
- It helps in earning profits due to time decay and flat price ranges.
- It involves less risk but requires accuracy at entry points.
Want to learn more about the iron condor strategy? Check out our blog here!
Tips to Succeed in Weekly Options Trading
Following are some handy tips that we would suggest, based on our 15+ years of experience mentoring US market traders:
- Select Liquid Stocks & ETFs: Buy highly liquid stocks such as SPY, QQQ, AAPL, and TSLA.
- Monitor Market Volatility: Use the VIX index to measure risk.
- Place Stop-Loss & Targets: Always control downside risks with rigid exit rules.
- Apply Technical Analysis: Study price trends, resistance, and support.
- Keep Current with News: Earnings reports, Fed announcements, and economic data can create big moves.
Risks of Weekly Options Trading
Weekly options trading is a very profitable strategy and is widely used; however, it also has its disadvantages. Some of the associated risks are as mentioned:
- High Volatility: The prices can fluctuate wildly in a matter of hours.
- Time Decay: Weekly options lose their value at a faster rate as the expiration date approaches.
- Leverage Risk: Small mistakes can translate to enormous losses.
- Risk only what you can afford to lose easily.
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FAQs
Q1. What are weekly options?
Weekly options are short-term option contracts that expire each Friday. The expiry can be on a different day based on the ETF or the indexes. These contracts are ideal for traders who want to take advantage of quick price action and make faster profits.
Q2. Are weekly options good for beginners?
Yes, weekly options can be utilized by beginners to build their portfolio. However, it is advised that beginners start small while using this strategy and focus on the basics, such as buying calls or puts, before moving on to the advanced spreads.
Q3. What is the best weekly options strategy?
The best weekly options strategy to make rapid profits includes purchasing weekly calls/puts or credit spreads.
Q4. How much money do I need to start trading weekly options?
You can start trading weekly options with as little as $100–$500. If you are a beginner, we advise you to start small and scale as you gain experience. This helps you manage risk carefully and understand better as you trade further.
Q5. Can I trade weekly options on SPY and QQQ?
Yes. ETFs such as SPY and QQQ are highly sought after for weekly options trading because they have high liquidity and volume. This is advantageous for most traders to make rapid profits.