Weekly Options Trading – A Brief Guide for Beginners
Before venturing into the trading market, it is essential to learn about the different types of trades. One of the prominent options that has existed since 1972 is called options trading. This type of trading is popular among both traders and investors because it offers greater rewards.
Talking about options trading, the concept of weekly options trading was introduced much later. While weekly options are similar to the standard options, they still have a few differences. If you are willing to learn more about weekly options strategy , we suggest you to give this post a read.
To put it in simple words, weekly options trading includes the same product specifications as the options contracts or standard options. But instead of a month, weekly options last only for eight days.
It is worth mentioning that weekly options are introduced every week on Thursdays. Once they become active, they last for eight days and expires on a Friday. This means, traders involved in weekly options experience 52 expirations in a year. The good thing about this system is that you get to draw profits 52 times instead of 12 times in a year.
As mentioned before, most of the characteristics of weekly options is similar to standard options. However, there are some differences that are worth paying attention to. To help you understand better, we have discussed the primary characteristics of weekly options trading in the given pointers.
It doesn’t matter if it is a call option or a put option, if the premium is smaller, it will have a shorter expiration. Based on this logic, if you invest in a weekly option that expires on a first or second Friday of the month, it will require a smaller premium.
On the other hand, if you buy a weekly option that is meant to expire on a third Friday of the month, it can cost you more. So, you need to keep these things in mind when purchasing weekly options.
An important thing to learn about options is that it faces a certain level of change or volatility mainly because of the underlying value. However, weekly options are usually more responsive to changes than long-term options.
This means, weekly options are naturally more volatile than standard options. For anybody who wants to venture into weekly options trading, they should keep these things in mind.
Some traders prefer weekly options because it requires a smaller premium. But at the same time, it cannot be ignored that weekly options have a faster time decay rate.
In simple words, weekly options tend to rise higher as they get closer to the expiration date. As a weekly options trader, you should pay attention to these details to make the most of your investment.
Investing in weekly options can be beneficial, especially for those who want to draw 52 returns in a year. By implementing the right strategy, you can generate a profit out of your investment.